• These are interest rates on bonds that come due in a couple of years up to those that come due in seven or so years. These rates are higher than the Fed Funds rate.
• The excess over the short-term rate is an inflation premium for the length of the bond. That's a belief that beyond the current state there will be a withering away of the strength of the dollar by inflation. In the medium-term, changes like new method, new factories, the beginnings of new industries and life-style changes will affect the potential for growth in the economy without inflation.
• A current medium-term interest rate is 4.66%. One year ago it was 4.71%. (Sep. 21, 2002. 3.08% )

     * The market determines this rate.
     * It is very slightly lower than a year ago. Increased inflation concerns were raised by the Bush tax cut, the terrorists attack, and the war on terror, however the

Long-term rates

• These rates are offered on bonds with maturities 10 or more years in the future. The definitions are not absolute, but are guidelines. These rates are often higher and often lower than medium-term rates.
• The excess over the short-term rate is an inflation premium based on expectations over the longer term. In addition to the factors mentioned in the medium-term case, the federal deficit and the balance of payments come more into play.
• A typical long-term interest rate is 5.22%. One year ago it was 5.08%. (Sep. 21, 2002. 4.08% )
     * The market determines this rate.