Looking at the recent data and assuming the dynamic equilibrium model is correct along with a linear trend in rate increases, we see that the indicator will enter the error band sometime before 2020:…
However, the period of time the spread spends inside that error band ranges from a few months to a year (yield curve inversion is usually described as being an indicator a recession will happen within a year). So unless we have other data, we won't be able to predict the timing of this future recession. We do have other indicators, and this extrapolation is consistent with them.Information Transfer Economics
Yield curve inversion and a future recession
Jason Smith
1 comment:
There won't be any more rate increases until the 13 week treasury yield gets back on trajectory. Since May 22nd, it can't get much past 1.9% and recently has declined a little. Which is kind of unusual.
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