Fed Tightening May Usher in Yield Curve Inversion Late This Year, BofA Says
- Bank of America sees that happening late 2022 or early 2023
- Inversion’s recession-signaling power remains solid, BofA says
This article is for subscribers only.
The yield curve is bounding toward inversion as soon as this year as the Federal Reserve lays the groundwork for a rate-hiking cycle set to start next month, according to Bank of America Corp.
The narrowing of the gap between short- and long-term rates -- already underfoot -- is the normal outcome as the economy moves from the mid-point to the later-point of a growth cycle, Bruno Braizinha, the bank’s director of U.S. rates strategy, said in a note. The inversion ultimately happens when the Fed tightens its key rate beyond the neutral level, meaning the central bank’s policy is slowing growth.