How much of a difference a year can make. On July 4, it was expected that US interest rates would continue to rise as the US economy accelerated. That is exactly what happened until the end of 2018, when sluggish corporate profits and a huge market fall frightened investors and, most likely, the Federal Reserve. Fast forward to this July 4th: longer-term interest rates, which are determined by the market, have fallen dramatically since January. The yield on 10-year US Treasury bonds is now just less than 2%, about equal to the rate on three-month Treasury bills.
Long-term interest rates falling to meet short-term rates is not typical of a growing economy. The market assumption today is that the Federal Reserve will begin lowering its main short-term interest rate this year, maybe as soon as this month. Can lower interest rates extend the US economy's longest growth in history?
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