This article addresses some issues involved in using the term structure to conduct monetary policy. I begin by discussing the long bond rate as an indicator of inflation expectations. Second, I comment on the role that bond rates have played in recent . monetary history. Third, I explain how infor- mation in the yield curve can be used to overcome what I call the “policy in the pipeline problem.” Fourth, I review recent empirical evidence supporting the two theoretical views underlying our understanding of the term structure. I explain how “peso problems” associated with “inflation scares” in the bond market may help to account for a serious empirical.