. The three-month and 10-year spread is the Fed’s preferred measure of the Treasury yield curve as it shows the strongest historical correlation between curve inversion and forthcoming recession.
In a major shift, the U.S. central bank also expects to raise borrowing costs only once more through 2021, and no longer anticipates the need to guard against inflation with restrictive monetary policy. It also said it would halt the steady decline of its balance sheet in September. “The Fed has doubled down on its dovish tilt,” said Matt Freund, head of fixed-income strategies at Calamos Investments. “The global economy is clearly softening and the Fed is looking at liquidity conditions.”
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