Falling interest rates are likely to deter spending and boost savings rates, further weighing on growth.
A weakening economy may soon hurt consumers.
With the unemployment rate at a 50-year low, the hope is that the U.S. consumer will more than offset an otherwise faltering economy. Don’t bet on it.
Clearly, the broad economy is not only weak, but weakening. The yield curve has inverted, with 10-year Treasury note yields falling below two-year yields. Every time that’s happened in the post-war era, a recession has followed if it hadn’t already commenced. No exceptions.
The Federal Reserve Bank of St. Louis reports that the lower real interest rates are at the time of inversion, the longer the recession and the higher the unemployment rate climbs. The real 10-year yield is minus 0.13%, even lower than the 2.2% that preceded the 2007-2009 Great Recession.