2024-02-19 10:35:23 ET
Summary
- The inverted yield curve, historically a reliable indicator of recession, has not yet led to an economic contraction.
- Economist Campbell Harvey, who developed the yield-curve indicator, acknowledged its potential inaccuracy due to inflation-adjusted yields.
- Harvey argues that the Fed should cut interest rates sooner rather than later, as inflation is already within the preferred range and the Consumer Price Index data is stale.
There have been numerous forecasts for a recession over the past two years from Wall Street strategists and market pundits, but one has yet to materialize. One of the most important developments used to support their argument has been the inverted yield curve, which has historically been an extremely reliable leading indicator of impending economic contractions. The yield on the 10-year Treasury fell below that of the 2-year Treasury in July 2022 to start the inversion, but the economy continues to expand. The recession crowd insists that this indicator is still on track, as it operates with a lead time that can be as long as 24 months....
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A Voice Of Reason Says Inflation Is Already At 2%