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Economic Snapshot

Monday, October 1, 2001

3rd Quarter 2001

Q4-00 Q1-01 Q2-01 Q3-02
Growth Rate—Real Gross Domestic Product 1.9% 1.3% 0.3% -0.4*
Inflation Rate—Consumer Price Index 2.9% 4.2% 3.1% 0.7%
Civilian Unemployment Rate 4.0% 4.2% 4.5% 4.8%

*Advanced estimate

Graph on left is from the Board of Governors, Federal Reserve System, published in the Federal Reserve Bank of St. Louis' Monetary Trends October 2001. Graph on right is from the front cover of September 2001 Monetary Trends with article written by Michael T. Owyang, economist at the Federal Reserve Bank of St. Louis.

Have yields on Treasury securities moved in the same direction as the federal funds target rate?

Targeting the federal funds rate is one way in which the Federal Open Market Committee (FOMC) conducts monetary policy. As the graph on the right indicates, short-term rates have moved in the same direction as the federal funds rate. Long-term rates, however, generally have moved in the opposite direction. (See the Q & A page for an explanation.)

On the Treasury yield curve above, why are the two solid-line curves upward sloping whereas the dotted line is slightly downward sloping?

All three curves depict yields to maturity for Treasury securities. Notice that the curves for August and September 2001 indicate 3% to 3.5% yields on securities that mature in three months whereas yields on a 10-year Treasury security are approximately 5%. Both of these yield curves are typical upward sloping curves. The Treasury yield curve for September 2000, however, is slightly inverted, or downward sloping, indicating a negative outlook at that time for future economic performance.

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