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?
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Yield curves
4y ago#1Yes, it is correct.
Can you explain how is it correct?
4y ago#3Usually 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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