Yield Curve Reaction to the Fed’s Interest Rate Decision

The Fed and its monetary policy have effect on the entire yield curve; the economy and the stock market. By the decision to cut federal funds rate, the Fed signals increased risk of economic slowdown and lower inflation. Investors rush to safety and buy long-term treasury bonds. The entire yield curve shifts down. Lower interest rates are very beneficial to homeowners, consumers, businesses, overall economy and the stock market.

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