According to some economists in the US, the yield curve reflects the Fed’s success in reducing inflation, not a recession. Economists are of the opinion that the yield curve should be ignored in this context.
The U.S. yield curve, which inverted early in the Fed’s tightening cycle in 2022, is no longer an indicator for some economists to signal a recession.
Bank Of America Strategist Meghan Swiber said the inverted yield curve reflects expectations of a decrease in inflation rather than a decrease in growth. Ed Yardeni, head of Yardeni Research, said the yield curve points to the Fed’s success in reducing inflation.
Goldman Sachs economists urged investors to ignore the inverted yield curve, emphasizing that the curve reflects other long-term trends.
The yield curve reached its inverse level in March, which was last seen in the 1980s after the Fed’s aggressive rate hikes. Currently, the yield on the 10-year bond is 103 basis points below the two-year yields.
In 2000, 2007 and 2019, the inversion of the yield curve was followed by recession processes.