The yield curve predicts U.S. recessions remarkably well. In March, the yield curve hinted at a U.S. recession. Today, the inversion is broadening as the Fed hikes rates. A U.S. recession may coming. Here’s how the yield curve works and why it matters to financial markets. Economists aren’t prized for their forecasting skills. The yield curve, on the other hand, has a strong track record in calling recessions. The term structure of interest rates, which is the difference between short and long-bond yields, forecasts recessions relatively accurately. The yield curve has got a recession forecast wrong just once in the past 40 years according to Nicholas Burgess of Oxford University. That’s impressive.
Your new post is loading...
