Analysts at Rabobank explained that historically, inverted curves have been one of the best predictors of a recession in the short- to medium-term.
Key Quotes:
“An inversion of the curve would therefore certainly hurt the FOMC’s – and the market’s – confidence, which may force them to take a pause. Only last week, St. Louis’ Bullard said that the “central bank’s policies are to blame” for curve flattening; Dallas’ Kaplan said that he doesn’t want “knowingly invert” the yield curve”; and Atlanta Fed President Bostic added to this that it’s “his job” to make sure that the yield curve doesn’t invert. We agree and therefore expect two more rate hikes this year: in June and September.”
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