Economic Perspectives

Despite Yield-Curve Inversions, Recession Appears a Long Way Off

Authored by Brian Jones, FHLBNY Financial Economist

Highlights

September 10, 2019

• Inverted portions of the Treasury yield curve have heightened fears of impending recession
• Risk of recession based on yield curve growing; negative rates abroad contributing to inversion
• Yield curve inversions by themselves do not cause business cycle downturns
• Inventory overhang and commodity price shock absent
• Monetary and fiscal policy to become more accommodative
• Financial conditions offer few hints of an impending downturn
• Labor market conditions show no signs of deteriorating

Even before it became the longest expansion in U.S. history in July, the longevity of the current business cycle upturn prompted market participants and commentators to look for signs of its impending demise. With real business activity ambling along at an above-trend pace…

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