It looks like inflation will be defeated, says macroeconomist Edin Mujacik. To make a good assessment of this, it is best to focus on the United States. “This is the largest and most important economy in the world.”
“The US economy will suffer a recession in the fall.”
According to Mujagic, you can use several indicators for this purpose. “But one of the best is the difference between the 10-year US Treasury yield and the three-month yield.”
“One of the best indicators is the difference between the yield on ten-year US government bonds and the three-month yield.”
Typically, the interest rate increases as the term of the loan increases. “If you, as a lender, lend money for ten years, the money is exposed to all kinds of risks during that period,” Mojajek continues. “You want to be covered for that in the form of higher interest rates.”
Inverted yield curve
However, this does not mean that there cannot be exceptions. In this case, the so-called yield curve has been inverted. While you can never say anything with 100% certainty, Mojajek asserts that the spread between 10-year and three-month interest rates in the US had always turned negative before recessions in recent decades. “If we now look at the difference, we have to conclude that it is now also negative,” he says.
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It must be said that this spread became negative only in October 2022. “History shows us that when this spread becomes negative, a recession often follows twelve months later,” Mojajic says. “So if this trend continues compared to October, the US economy should enter a recession this fall.”
