The Federal Open Market Committee (FOMC), the Federal Reserve’s main policymaking body, meets this week to decide whether or not to raise interest rates. Since late 2015, the Fed has increased short-term interest rates eight times from (effectively) zero to a range of 2 percent to 2.25 percent. Normally, long-term interest rates are higher than short-term rates because investors assume more risk by lending money for, say, a decade rather than for three months. It’s called an “inverted” yield curve, when short-term rates exceed long-term rates. Banks and other financial institutions make money by borrowing short at low interest rates and lending long at higher rates.

Source: Washington Post December 16, 2018 23:48 UTC