SEVERE WX : Wind Advisory - Winter Weather Advisory View Alerts

Fed official worried about recession indicator

A top Federal Reserve official is worried about a warning sign in the bond market.The yield curve, a measure o...

Posted: Apr 19, 2018 10:14 AM
Updated: Apr 19, 2018 10:14 AM

A top Federal Reserve official is worried about a warning sign in the bond market.

The yield curve, a measure of short-term and long-term US Treasury bond rates, is flattening as investors prepare for the Fed to raise interest rates to keep the economy from overheating. Some economists fear the curve could tip over and invert if the Fed slams the brakes too quickly.

"I am getting concerned about the flattening yield curve," St. Louis Fed President James Bullard told CNN's Richard Quest on Wednesday. "The inverted yield curve is a powerful predictor of economic downturns."

The curve inverted before the Great Recession a decade ago and before a shorter recession in 2001.

Related: What's a flattening yield curve and why it may be scary

But Fed Governor Randal Quarles said Wednesday that an inverted yield curve would not signal the United States is entering a recession anytime soon.

"I don't think it's likely the inversion of the yield curve is a reflection of a recession to come," Quarles said at the annual Bretton Woods conference in Washington.

Two-year bond yields, sensitive to the Fed's actions, are rising as investors' expectations for rate hikes go up. Ten-year yields have halted their march toward 3% as inflation fears ease.

"I think fundamentally the market just doesn't see that much inflation pressure," Bullard said.

The gap between the two-year and the 10-year has tightened to its narrowest since 2008.

Bullard warned that if the Fed raises interest rates too aggressively, it could push the curve into an inversion. The Fed plans three rate hikes in 2018, barring a surprising pickup in inflation.

"I think we've put ourselves in a good position here," Bullard said. "I would just not go any further unless there are further surprises."

- CNNMoney's Matt Egan and Donna Borak contributed to this story.

New York Coronavirus Cases

County data is updated nightly.

Cases: 2777942

Reported Deaths: 57757
CountyCasesDeaths
Kings35194510985
Queens32876810428
Suffolk2604523698
Nassau2301243339
Bronx2142426810
New York1789954667
Westchester1498342357
Erie1290642084
Monroe1006491262
Richmond934401975
Orange63479944
Onondaga61261825
Rockland56085783
Dutchess38686513
Albany35325420
Oneida34177655
Niagara29802426
Broome29007438
Saratoga25756229
Schenectady19905249
Ulster19554294
Rensselaer18059197
Chautauqua15619197
Oswego14725138
St. Lawrence13412146
Putnam13365101
Chemung13290176
Steuben13064195
Ontario12164121
Jefferson11798108
Wayne10744105
Cattaraugus10379165
Cayuga10015114
Sullivan995990
Genesee8992146
Herkimer8647146
Clinton840848
Fulton8087115
Tompkins769361
Warren767998
Madison7654109
Livingston751378
Montgomery7453165
Washington705283
Tioga660474
Cortland624289
Allegany6238123
Columbia5915115
Chenango576697
Orleans575996
Franklin569127
Otsego561568
Wyoming554869
Greene511390
Delaware465553
Lewis434640
Seneca341570
Essex308938
Schoharie284725
Yates207334
Schuyler203020
Hamilton5273
Unassigned1482
Out of NY0341
Utica
Mostly Cloudy
37° wxIcon
Hi: 52° Lo: 34°
Feels Like: 26°
Oneonta
Cloudy
32° wxIcon
Hi: 51° Lo: 33°
Feels Like: 21°
Herkimer
Mostly Cloudy
37° wxIcon
Hi: 55° Lo: 36°
Feels Like: 26°
Old Forge
Cloudy
37° wxIcon
Hi: 47° Lo: 30°
Feels Like: 26°
WKTV Radar
WKTV Temperatures
WKTV Severe Weather
2022 WKTV Golf Card only $99.99
Game Day Deals - New Deals Each Week
Stuff the Bus Locations
Saluting Those Who Are Proud 2 Serve