Cosma Shalizi (2007): Those Voices Again...: Hoisted from the Archives

10 Year Treasury Constant Maturity Minus 2 Year Treasury Constant Maturity FRED St Louis Fed

Finally, the Federal Reserve seems to have realized that its policy of driving headlong toward a yield-curve inversion was unwise. So they are "rethinking". But I am not yet confident that they are out of the woods. While the Federal Reserve may not believe that the slowing economy will relieve inflationary pressures, financial markets still believe that the economy will slow so much as to perhaps produce a recession. This strongly suggests that the Federal Reserve is right now—even with its "rethink"—getting the balance of risks wrong: Tim Duy: Fed Holding Steady For Now: "I think the Fed will on net conclude that there exists reason to believe that the economy will slow in 2019 relative to 2018 but the degree of slowing remains uncertain and not clearly sufficient to relieve inflationary pressures. As such, I doubt that the Fed will drop its internal bias toward further tightening.... That bias is clearly evident externally in the Fed’s Summary of Economic Projections. It is also evident in the statement with this sentence: 'The Committee judges that some further gradual increases in the target range for the federal funds rate will be consistent with sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee’s symmetric 2 percent objective over the medium term'...

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