Eoin Treacy's view -
Investors see a 90 percent probability of a rate hike at the Fed’s meeting next month and around a 60 percent chance of a fourth move when officials gather in December, according to prices in interest-rate futures markets. As the view that the Fed will keep raising rates has grown, the yield curve has flattened, with short-term yields rising more than long-term ones.
Bostic, together with several other regional Fed chiefs including St. Louis’s James Bullard, Robert Kaplan in Dallas and Minneapolis’s Neel Kashkari, have used this year’s flattening curve to argue that the central bank should tread warily in raising rates all that much further to avoid an inversion.
History is on their side: Over the past 50 years, the U.S. has always tumbled into recession within a year or two of the curve flipping.
“There are many, many signals in the economy and we have to pay attention to all of them,’’ Bostic said. “This yield curve will be one.’’
The big question facing central bankers as they retreat from extraordinary monetary stimulus is whether the next recession will be a recuperative measure which would help unwind excesses or whether it would represent the dawn of another credit crisis?
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