The interest rate curve has inverted but we do not forecast a recession will follow.

Many forecasters have placed great significance on the inversion of the yield curve last week. The inversion was between intermediate and longer-term bonds. The yield on the two-year ended the week at a 2.44% yield while the ten-year ended at a 2.38% yield. This negative 6 basis point TED spread was a positive 90 basis points at the end of 2021 and 130 basis points at its peak last August. The significance of this inversion is the correlation between an inverted curve and a recession developing in the short run. Historically the recession unfolds as short rates move up to slow an overheating economy.