Our website will undergo scheduled maintenance on the morning of Thursday, August 11, 2022. During this time, connection to our website and some of its features may be unavailable. Thank you for your patience and we apologize for any inconvenience.

Discussion Paper

Monetary Policy, Inflation Outlook, and Recession Probabilities


Abstract: An inverted yield curve—defined as an episode in which long-maturity Treasury yields fall below their short-maturity counterparts—is a powerful near-term predictor of recessions. While most previous studies focus on the predictive power of the spread between long- and short-maturity Treasury yields, Engstrom and Sharpe (2019) have recently shown that a measure of the nominal near-term forward spread (NTFS), given by the difference between the six-quarter-ahead forward Treasury yield and the current three-month Treasury bill rate, dominates long-term spreads as a leading indicator of economic activity.

https://doi.org/10.17016/2380-7172.3175

Access Documents

Authors

Bibliographic Information

Provider: Board of Governors of the Federal Reserve System (U.S.)

Part of Series: FEDS Notes

Publication Date: 2022-07-12

Number: 2022-07-12