Report
Does the Federal Reserve try to prevent an inversion of the yield curve?
Treasuries (US Treasury debt) are a safe-haven asset, which can still be seen today. Every time global risk aversion increases, dollar long-term interest rates therefore fall, which can invert the yield curve in the United States (as is the case today). The question then becomes whether the Federal Reserve will have to lower interest rates to fight the inversion of the dollar yield curve. An inversion of the yield curve may indeed discourage the supply of bank loans and m a y lower growth expectations since many economic agents unfortunately believe that a yield curve inversion heralds a recession. Econometric analysis shows that the Federal Reserve does not react at all to the yield curve slope when setting the Fed Funds rate.
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Natixis
Based across the world’s leading financial centers, Natixis CIB Research offers an integrated view of the markets. The team provides support to inform Natixis clients’ investment and hedging decisions across all asset classes.
Patrick Artus
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