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An inverted yield curve can arise if government policy is to keep short term interest rates high in order to bring down inflation.
Is this statement correct?
Usually the yield increases the more years there are to maturity (I,e, higher interest rates for longer deposits/borrowings).
If there are higher interest rates for short-term deposits/borrowings, then it is possible for the yield to reduce with more years to maturity which would mean an inverted yield curve.
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