In the financial markets, there is concern about the possibility of a recession in the US. Oil and food prices are high, and supply chain disruptions in China remain a problem. In the US, consumer price inflation is now at 8.5% and it will be necessary to keep raising interest rates. The danger is that the Federal Reserve may increase it too quickly or too sharply and that it will plunge the economy into recession. An indicator of this concern is the difference between the interest rates on 2-year and 10-year Treasury bills. Recently, the yield curve has reversed. Two-year rates were higher than ten-year rates, and over the last sixty years, this was a sign of recession. How worried should we be?
* The Economics Minute is supported by the NWU Business School.
