Fed's Kashkari worries about the flattening yield curve
Fed's Kashkari worries about the flattening yield curve, in his message posted on the Minneapolis website. Noting the predictive power of the curve, where an inverted curve has presaged every recession over the past half-century. He warned those saying "this time is different," and concluded "analysts don't know for sure." The rationale for "this time is different" centers on the low term premium, perhaps due to the Fed's expanded balance sheet, or excess global savings, and hence there is not a good comparison to history. Kashkari, one of the more dovish on the FOMC (though not a voting member) fears that if policymakers continue to raise rates, there is risk of an inversion, as well as the potential for putting the breaks on the economy. "Deciphering the many signals from the financial markets is not an exact science. But declarations that 'this time is different' should be a warning that history might be about to repeat itself."