With the yield curve un-inverting, our composite model indicates that the probability of a recession in 12 months’ time has fallen to 11.7%, from a recent peak of more than 20%. Nevertheless, we shouldn’t make the mistake of concluding that the threat has passed completely – the yield curve did occasionally un-invert ahead of historical recessionary experiences. It is rare for the probability to reach 20% without a recession following within the next year or two although, as we have stressed before in our Focus, the structural decline in the term premium on long-dated bonds means that the yield curve might not be as reliable as a recession indicator in the current environment.
Become a client to read more
This is premium content that requires an active Capital Economics subscription to view.
Already have an account?
You may already have access to this premium content as part of a paid subscription.
Sign in to read the content in full or get details of how you can access it
Register for free
Sign up for a free account to gain:
- Unlock additional content
- Register for Capital Economics events
- Receive email updates and economist-curated newsletters
- Request a free trial of our services