In this article, Mr. Grannis admits that the U.S. economy is weakening, but notes that there are a sufficient number of economic indicators that suggest that fundamentals are still strong and, therefore, an imminent recession is highly unlikely.
By now, just about everyone knows that an inverted yield curve is a sign of an impending recession. It may be a necessary sign, but it is not sufficient. It takes more than an inverted yield curve; it also takes very high real interest rates, which are the Fed’s most powerful tool, to trigger a recession. Today the yield curve is only slightly and partially inverted, while real yields are still relatively low.
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