Fed not on red alert over yield-curve inversion
The Federal Reserve isn’t moving into recession fighting mode after the U.S. Treasury yield curve inverted Wednesday for the first time in a decade, and won’t decide on a course of action until much closer to the next interest-rate policy meeting on September 17-18, economists said Wednesday.
Fed officials were divided last month on the need for an interest rate cut, with two policy makers dissenting against the move. Those opposing the rate cut are skeptical that the yield curve is a valid signal of a recession. Another interest rate cut is expected in September though. Gapen said the U.S. August payrolls and unemployment report, to be released on Sept. 6, will be an important gauge of whether the rate cut will be a quarter or a half percentage point.
But she added, in an interview on the Fox Business Network’s WSJ at Large with Gerry Baker, that the yield curve “may be a less good signal” than in the past.
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