BENGALURU (Reuters) – The risk of a U.S. recession in the next two years has risen to 40 percent, according to a Reuters poll of economists who also found a significant shift in expectations toward fewer Federal Reserve interest rate rises next year.
What has fueled concerns of a downturn is the flattening of the U.S. yield curve – with the spread between two- and 10-year note yields falling to less than 10 basis points, the smallest gap since the run-up to the last U.S. recession.
Yield - Curve - Investors - Growth - Inflation
A flattening yield curve suggests investors believe economic growth and inflation will slow. A yield curve inversion has preceded almost all recessions over the last half-century.
The probability of a U.S. recession in the next two years has jumped to 40 percent, according to the median of those polled, the highest since that question was first asked in May this year.
Time - Probability - Reuters - Poll - January
Before that, the last time such a high probability appeared in a Reuters poll was in January 2008, just eight months before the collapse of U.S. investment bank Lehman Brothers, which brought on the Great Recession.
The range of forecasts, which runs from 15 to 75 percent, also points to a higher probability of a recession in the next two years compared to a poll conducted just last month, which had a median 35 percent chance.
Conclusions - Line - Reuters - Polls - Total
Those conclusions line up with recent Reuters polls of a total of over 500 economists, fund managers, currency analysts and equity strategists which have clearly showed economic momentum in the United States has peaked and a downturn may be approaching soon.
“The combination of a Fed that does not think that inverting the yield curve is a problem (along with) a global outlook that is not likely to improve in a sustained manner, is likely to lead to a monetary policy error that will...
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