Fed Move Raises Worries Over Inverted Yield Curve

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The Federal Reserve raised short-term interest rates again last week by 25 basis points to 3%, in its continued efforts to dampen inflation and economic growth. But the continued rise in short-term rates have had little effect on long-term rates, raising concerns about a continued squeeze on credit unions and other financial intermediaries.

"The risk now is the inability (of the Fed) to talk up long-term rates," NAFCU economist Jeff Taylor told The Credit Union Journal. He worried about the phenomenon known as an inverted yield curve-when short term rates are higher than long-term rates-which discourages longer-term lending and investments because short-term lending and investing are more profitable, putting increased pressure on credit unions and other intermediaries.

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