AFMC - Is The Yield Curve Still Relevant? An Economist Clarifies

2024-05-21 11:30:00 ET

Summary

• When the US Treasury yield curve inverts (short rates rise above long rates) the shift is widely viewed as a reliable forecast that a recession is near.
• The curve has been inverted since July 2022, the longest inversion on record, but a recession has yet to arrive.
• Having an inverted yield curve, flat manufacturing activity, slowing employment growth, and the inflation rate higher than the unemployment rate suggests a level of instability that would facilitate the formation of a business cycle peak.

When the US Treasury yield curve inverts (short rates rise above long rates) the shift is widely viewed as a reliable forecast that a recession is near. But this time has been different, or so it seems. The curve has been inverted since July 2022, the longest inversion on record, but a recession has yet to arrive....

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