A recession is guaranteed this year based on Jerome Powell's favorite bond-market gauge
"Frankly, there's good research by staff in the Federal Reserve system that really says to look at the short — the first 18 months — of the yield curve. That's really what has 100% of the explanatory power of the yield curve. It makes sense. Because if it's inverted, that means the Fed's going to cut, which means the economy is weak."
An inverted yield curve suggests investors aren't confident about future returns, and it's a classic warning for a economic downturn. Additionally, to Powell's point, the bond market is saying that the central bank will reduce interest rates in the coming 18 months, given that the near-term yields are higher than where investors expect them to be later on.
On Wednesday, the Fed made a quarter-point interest rate hike, and markets began pricing in higher odds that the central bank would cut rates as soon as July, Bloomberg data shows.
United States Latest News, United States Headlines
Similar News:You can also read news stories similar to this one that we have collected from other news sources.
Powell speech: Speed of run on SVB suggests need for possible regulatory changesFOMC Chairman Jerome Powell comments on the policy outlook after the Federal Reserve's decision to raise the policy rate by 25 basis points to the ran
Read more »
Morning Bid: Hoping Powell sheds light in fog of uncertaintyA look at the day ahead in Asian markets from Jamie McGeever.
Read more »
Fed's Powell faces political storm, policy minefield over SVB oversightThe Federal Reserve is expected to raise interest rates by a quarter of a percentage point on Wednesday, a decision that will land amid a brewing political storm over the U.S. central bank's oversight of collapsed Silicon Valley Bank and with the financial world hanging on the words of one man: Jerome Powell.
Read more »
Morning Bid: Jittery markets attempt risk-on rally while waiting for PowellA look at the day ahead in European and global markets from Ankur Banerjee
Read more »
Forex Today: Markets brace for volatility surge on Fed rate decision and Powell presserForex Today: Markets brace for volatility surge on Fed rate decision and Powell presser – by eren_fxstreet Currencies Majors Fed Macroeconomics Commodities
Read more »