, a strategist at Societe Generale who is well known for his bearish views, is surprisingly among those who aren't taking this recession signal at face value.
He's by no means belittling the track record of yield-curve inversions, especially of the more notorious gap between 2- and 10-year yields. Instead, he's highlighting the Fed's role in causing the inversion and what may happen next. The suspension of QE has had the opposite effect of lifting the shadow rate, Edwards said. Tacking this shadow rate on top of increases in the effective fed funds rate, he found that the overall increase in borrowing costs has been considerably more aggressive than meets the eye. He calculated a combined interest-rate move from -3.0% to 2.5%, not simply 0.25% to 2.5%, when factoring in the shadow rate.