Federal Reserve Chairman Jerome Powell will discuss the economy, inflation and interest rates at an event in Washington DC today. Many investors will be left to see if he addresses the possibility of a recession, especially given that the US Treasury yield curve has recorded its biggest inversion in over 40 years.
An inverted yield curve is often seen as a warning sign of an impending recession. Long-term yields are usually higher than short-term yields. This is because investors want to avoid the risk of unexpected inflation or rising interest rates.
Yields on 10-year U.S. Treasuries eased slightly after falling 0.78 percentage points below 2-year yields, the biggest negative gap since 1981. This reversal reflects both the surprising positive news on inflation and the view that the Federal Reserve will continue to raise interest rates and keep them high.
Yesterday, the Conference Board’s Consumer Confidence Index fell to a four-month low as fears of inflation soured the outlook for US consumers. The Conference Board’s director of economic indicators, Lynn Franco, said consumer expectations were “pessimistic” in the near term, and the survey found that people still feel a recession is likely. He added that he suggested
Y-chart.
