The effect of those mis-assessments was to produce a stunning steepening of the yield curve. The spread between long and short-term rates is often viewed as one of the most reliable cyclical indicators and a widening as a measure of the increased stimulus of monetary policy.
But I viewed the widening in this episode as evidence of the reduced effectiveness of monetary policy in an environment where actions by bond-market participants were preventing long-term interest rates from adjusting in response to the policy-induced decline in short-term rates.