The Flattening Yield Curve
By Neel Kashkari, President of the Federal Reserve Bank of Minneapolis
Today, policymakers are paying increased attention to the so-called flattening yield curve — the difference in yields between long-term and short-term Treasury bonds. For the past 50 years, an inverted yield curve, where short rates are higher than long rates, has been an excellent predictor of a U.S. recession. In fact, during this half-century period, each time the yield curve has inverted, a recession has followed.
Some say, “No. This time is different,” and that the flattening yield curve is not a concern. The truth is we don’t know for sure.
