I'm working on this supposed to be a simple multiple choice question: The yield curve indicates?
A. the relationship between existing short, medium and longer term interest rates, independent of expectations about future interest rates.
B. the relationship between the existing cash rate and the expected level of cash rate in the future
C. expectations about future levels of medium and longer term interest rates
D. among other things, expectations about the future levels of the cash rate and hence about future monetary policy
I believe all the answer could be correct, but I'm leaning toward A because the yield curve could be seen as a "snapshot" of short, med and long term rates. Hence, although the expectation of future cash rate or monetary policy does affect short and long term rate, the existing yield curve should already capture these expectations. But A could be wrong because of the word "independent" alone.