FOMC Excerpt: Flatter Yield Curve Not Unusual-Text>

     WASHINGTON (MNI) - The following are excerpts from the Federal Open 

Market Committee minutes of the December 12 - December 13 meeting, 

published Wednesday: 

     Meeting participants also discussed the recent narrowing of the gap 

between the yields on long- and shortmaturity nominal Treasury 

securities, which had resulted in a flatter profile of the term 

structure of interest rates. Among the factors contributing to the 

flattening, participants pointed to recent increases in the target range 

for the federal funds rate, reductions in investors estimates of the 

longer-run neutral real interest rate, lower longerterm inflation 

expectations, and lower term premiums. They generally agreed that the 

current degree of flatness of the yield curve was not unusual by 

historical standards. However, several participants thought that it 

would be important to continue to monitor the slope of the yield curve. 

Some expressed concern that a possible future inversion of the yield 

curve, with short-term yields rising above those on longer-term Treasury 

securities, could portend an economic slowdown, noting that inversions 

have preceded recessions over the past several decades, or that a 

protracted yield curve inversion could adversely affect the financial 

condition of banks and other financial institutions and pose risks to 

financial stability. A couple of other participants viewed the 

flattening of the yield curve as an expected consequence of increases in 

the Committees target range for the federal funds rate, and judged that 

a yield curve inversion under such circumstances would not necessarily 

foreshadow or cause an economic downturn. It was also noted that 

contacts in the financial sector generally did not express concern about 

the recent flattening of the term structure. 

     ** MNI Washington Bureau: (202)371-2121 ** 

[TOPICS: MMUFE$,M$U$$$,MT$$$$]