Interesting Recession Indicators

The Federal Funds Rate and the 2 year US government bond vs the 10 year US government bond are showing that a recession is imminent (not that we haven’t been in a recession since the Great Recession of 2008).

Whenever the Federal Funds Rate is raised by the Federal Reserve, is then kept the same, and is then lowered, a recession follows. Recessions are the grey lines in the following graph. Today, September 18, 2024, the Federal Reserve lowered the Federal Funds Rate by half of a percentage point. That rate cut is not reflected in the graph, which is only current as of September 3. [1][2]

Also, until late August of this year, starting in 2022, loaning the bankrupt US government money for 10 years had yielded less interest than loaning them money for 2 years. When someone wants a loan for 10 years instead of 2 years, they normally have to pay more interest to make up for the additional 8 years that the lender may not use their money. When it isn’t normal, it is called a yield curve inversion on a graph. [3]

The following graph shows the yield curve inversion, which is below the 0 line on the graph. Recessions follow when interest rates go back to normal, above the 0 line on the graph. Recessions are the grey lines.