Several causes of yield curve inversion bear no relation to the coming of a recession

In the United States, the yield curve is now inverted; in the euro zone, it is flattening rapidly. This inversion of the yield curve has been widely touted as heralding a recession. But it has to be pointed out that many causes of this yield curve inversion bear no relation to the approach of a recession: The absence of inflation, even at full employment; The low level of uncertainty regarding short-term interest rates, which pushes down the term premium; Excess savings and demand for risk-free bonds; In the euro zone, Germany’s declining public debt ratio.