When will the main indicator of the US recession work?
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The main recession indicator in the US, the term spread, which shows the difference between the yields of short and long Treasury bonds, came close to zero in early August. It may move into the negative zone closer to autumn. A meeting of the US Federal Reserve is scheduled for September 21, at which, as experts expect, the regulator will tighten monetary policy.
Term spread is a stable indicator for predicting a recession not only in the US, but also in other developed countries. If it enters the negative zone, i.e., the rates on 10-year bonds are lower than the rates on three-month ones, this shows that business activity in the coming months is perceived by the business worse than in the past. And then we can talk about a possible recession. Term spread relies on the ability of a business to anticipate events in the coming months or even a year.
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