Minneapolis Fed President Neel Kashkari warned of the recession signal from flattening yield curve in a paper. Over the past 2.5 years, the difference between 10 year yield and 2 year yield has dropped 134bps to 25bps today, a 10-year low. He warned that “if the Fed continues raising rates, we risk not only inverting the yield curve, but also moving to a contractionary policy stance and putting the brakes on the economy, which the markets are indicating is at this point unnecessary.”
And he added that “this time is different” are the “four most dangerous words in economics”. And such declaration should be a “warning that history might be about to repeat itself.
