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On the eve of a highly anticipated speech by US Central Bank boss Jerome Powell on Friday, August 23, the US economy is picking up on signs of weakness. For the third time since mid-August and the second time in less than a week, the US bond yield curve reversed on Thursday. A phenomenon that for forty years is heralding a recession in the United States.
The 10-year US Treasury bond rate has again fallen below the two-year rate. That short-term US debt is considered, even momentarily, as riskier than long-term debt indicates investor distrust in the near future of the US economy.
The five times it has been expressed over the past forty years, this rate reversal resulted in a few months later a recession in the United States.
It is understandable that Donald Trump, already in the election campaign, is always asking for more monetary easing to the boss of the Central Bank, the Fed .
The reversal of rates is certainly less meaningful than 13 years ago, before the 2008 crisis. Inflation, which was strong at the time, is currently non-existent. But while employment and consumption are still doing very well in the United States, signs of weakness are growing in the US economy.
Prolonged trade disputes have reduced business investment. This Thursday, manufacturing activity in August declined for the first time in almost 10 years.
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