The yield curve is telling us that investors expect the following:
1. no recession (the 3-mo./10-yr. spread is positive)
2. modest inflation (the 10-yr./30-yr. spread is slightly positive)
3. slow growth (GDP a year from now is expected to be about 2.9% based on the above spreads)
Not exciting but not the end of the world either!
3 comments:
GDP one year ahead is at 3.16%. The party in power has to inflate the economy going into a recession. So what is the long term GDP average?
oops! "going into and election" was my intended word.
Dear Westridge,
The party in power certainly has an incentive to inflate and prevent a recession during an election year! Long-term GDP average may exceed 3.25% for a while. We'd need structural changes such as population growth and productivity gains to sustain GDP above its mean.
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