Wednesday, March 15, 2017

The Fed raised interest rates today, oh boy

The Fed raised its interest rate target to a band between 0.75 to 1.0 percent at today's meeting, so I have to update this graph with a new equilibrium level C'':


We might be able to see whether the interest rate indicator of a potential recession has any use:


This indicator is directly related to yield curve inversion (the green curve needs to be above the gray curve in order for yield curve inversion to become probable). Here are the 3-month and 10-year rates over the past 20 years showing these inversions preceding recessions (both in linear and log scales):



No comments:

Post a Comment

Comments are welcome. Please see the Moderation and comment policy.

Also, try to avoid the use of dollar signs as they interfere with my setup of mathjax. I left it set up that way because I think this is funny for an economics blog. You can use € or £ instead.