Fed official worried about recession indicator

A top Federal Reserve official is worried about a warning sign in the bond market.The yield curve, a measure o...

Posted: Apr 19, 2018 7:14 AM
Updated: Apr 19, 2018 7:14 AM

A top Federal Reserve official is worried about a warning sign in the bond market.

The yield curve, a measure of short-term and long-term US Treasury bond rates, is flattening as investors prepare for the Fed to raise interest rates to keep the economy from overheating. Some economists fear the curve could tip over and invert if the Fed slams the brakes too quickly.

"I am getting concerned about the flattening yield curve," St. Louis Fed President James Bullard told CNN's Richard Quest on Wednesday. "The inverted yield curve is a powerful predictor of economic downturns."

The curve inverted before the Great Recession a decade ago and before a shorter recession in 2001.

Related: What's a flattening yield curve and why it may be scary

But Fed Governor Randal Quarles said Wednesday that an inverted yield curve would not signal the United States is entering a recession anytime soon.

"I don't think it's likely the inversion of the yield curve is a reflection of a recession to come," Quarles said at the annual Bretton Woods conference in Washington.

Two-year bond yields, sensitive to the Fed's actions, are rising as investors' expectations for rate hikes go up. Ten-year yields have halted their march toward 3% as inflation fears ease.

"I think fundamentally the market just doesn't see that much inflation pressure," Bullard said.

The gap between the two-year and the 10-year has tightened to its narrowest since 2008.

Bullard warned that if the Fed raises interest rates too aggressively, it could push the curve into an inversion. The Fed plans three rate hikes in 2018, barring a surprising pickup in inflation.

"I think we've put ourselves in a good position here," Bullard said. "I would just not go any further unless there are further surprises."

- CNNMoney's Matt Egan and Donna Borak contributed to this story.

Oregon Coronavirus Cases

Data is updated nightly.

Confirmed Cases: 30801

Reported Deaths: 526
CountyConfirmedDeaths
Multnomah6818130
Marion444790
Washington428958
Umatilla291341
Clackamas225661
Malheur152723
Jackson10394
Lane96415
Deschutes76912
Yamhill73814
Jefferson5138
Polk50215
Morrow4886
Lincoln47213
Linn46613
Union4352
Benton2856
Klamath2732
Hood River2450
Wasco2343
Douglas2093
Josephine1832
Columbia1541
Coos1380
Clatsop1170
Baker902
Crook601
Tillamook480
Lake280
Wallowa281
Curry270
Sherman180
Harney120
Gilliam80
Grant80
Unassigned00
Wheeler00
Eugene
Broken Clouds
56° wxIcon
Hi: 72° Lo: 54°
Feels Like: 56°
Corvallis
Scattered Clouds
53° wxIcon
Hi: 73° Lo: 54°
Feels Like: 53°
Roseburg
Clear
55° wxIcon
Hi: 76° Lo: 57°
Feels Like: 55°
North Bend
Overcast
55° wxIcon
Hi: 65° Lo: 55°
Feels Like: 55°
KEZI Radar
KEZI Temperatures
KEZI Planner

LATEST FORECAST

Community Events