The Fed’s high rates spur fear of slowdown, yet recession signals have so far proved wrong
Associated PressWASHINGTON — The turmoil shaking global financial markets reflects a sudden fear that the Federal Reserve may have held its key interest rate too high for too long, heightening the risk of a U.S. recession. “Absent a shock, it’s a bit more challenging to get into a recession.” Other previously notable recession indicators that have flopped in the post-pandemic era include: — A bond market measure with a dry-as-dust label: The “inverted yield curve.’’ — The rule of thumb that two consecutive quarters of shrinking economic output amount to a “technical recession.’’ Last week, Powell said that while he was aware of the Sahm Rule and its implications, other recession signals, such as changes in bond yields, haven’t been borne out in recent years. “Many received pieces of received wisdom just haven’t worked, and it’s because the situation really is unusual or unique.” Powell spoke after the central bank kept its key rate unchanged but signaled that it could reduce the rate as soon as the next policy meeting in September. As a result, they have been able to spend and invest without borrowing as much, muting the impact of the Fed’s rate hikes and dulling the signal from the inverted yield curve.