Ever since 2008, Americans have been tense around the word ‘recession’. With the financial crisis happening over a decade ago, and reforms and policies still being enforced to fix the problems. It’s no wonder Americans are fearful for another recession. So, what’s the next recession forecast? Is another recession looming?
While the political atmosphere may be strained, the economy is the best it has been in a while. The housing market is stable and in favor of both buyers and sellers which is a direct effect on the positive economy.
What causes recessions?
Ed Yardeni writes in his book “The Yield Curve Model is based on investors’ expectations of how the Fed will respond to inflation. It is more practical for predicting interest rates than is the Inflation Premium Model. It makes sense that the federal-funds rate depends mostly on the Fed’s inflation outlook, and that all the other yields to the right of this rate on the yield curve are determined by investors’ expectations for the Fed policy cycle.”
All this quote means is that recessions are not created by yields but by credit crunches. When Americans start buying goods with credit cards but do not have money is when a recession may begin.
Yield Curve still plays a role
While it has been noted that a yield curve is not the cause of a recession, the yield curve still can be used to make predictions on the market. A study conducted and updated recently about a yield curve produced a result of the probability of a recession of 50%. This could easily be seen as a chance by the flip of a coin or a potential connection between the recession and the yield curve.
What Fed’s Says about next recession forecast?
As of right now the Fed has predicted and attempted to confirm that there would be any rate hiked but next year there would be one.