Powell’s Favored Curve Calls Time on the Fed’s Tightening Cycle
- So-called near-term forward spread seen as recession indicator
- Slower inflation rise spurs bets on rate cuts late next year
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Bond traders are declaring victory over the Federal Reserve’s war on inflation after it slowed last month to a weaker pace than economist forecasts.
A part of the yield curve that Federal Reserve Chair Jerome Powell watches closely to monitor recession risks inverted for the first time since the pandemic hit in early 2020. The so-called near-term forward spread -- which tracks the difference between expected yields on three-month Treasury bills in 18 months and those on current T-bills -- fell to minus 14 basis points Thursday.