Thursday, August 9, 2018

The Flattening Yield Curve as a Sign of Economic Strength

The economist, Tim Duy, has written another article on the flattening yield curve in which he details how, given our current economy and economic data, the current flattening yield curve is most likely an all clear signal of economic strength. He concludes, "The thing to fear is when inflationary

concerns induce the Fed to invert the yield curve or failure to respond to an inverted curve."

I see no reason to add anything to what he writes in the article and urge you to read it.

He has also written a new article on the Fed's data path based on the July 2018 jobs report.   The one caveat I would have is I believe the stagnant wage growth is a larger problem than many people think.  In July, wage growth year to year is 2.7% while inflation is 2.9%.  There is growing evidence this is not a lack of skills but a desire of corporations to grow profits by refusing to pay higher salaries to fill jobs.  I intend to have more on this in another post.

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