Abstract
This paper investigates the predictive power of the interest rates during the period 1929–1940 in the United States. Our empirical evidence finds no support for the one-to-one relationship between the term structure of short-term interest rates and inflation for forecasting horizons of six months less or greater than one year. The hypothesis is not rejected for a 3 to 12 month horizon or for the 12 to 24 month horizon with a structural break.