In the fall, the US economy will be in recession.

In the fall, the US economy will be in recession.

EconomyJul 20 23 13:42Author: Remy Cook

Edin Mojacic, a macroeconomist, says inflation is on track. To make a good assessment of this, you’d better set your sights on the United States. “This is the largest and most important economy in the world.”

It looks like inflation is about to hit. So says macroeconomist Edin Mojacic, although there are some question marks. “How do we estimate whether there will be a recession after all?” (Levin Roberts/Ciba USA)

According to Mujagic, you can use multiple threads for this. “But one of the best is the difference between the 10-year and 3-month US Treasury yield.”

One of the best indicators is the difference between the 10-year yield on US Treasury bonds and the 3-month yield.

Edin Mojacic

Usually, the interest rate goes up because the term of the loan is longer. “If you lend money for ten years as a lender, the money will face all kinds of risks during that period,” Mojacic continues. “You want to be covered for that in the form of a higher benefit.”

inverted yield curve

However, this does not mean that there are no exceptions. In this case, the so-called yield curve is inverted. And while you can never say anything with 100 percent certainty, Mojácic contends that the spread between the 10-year and 3-month rates in the United States has turned negative each time in the last decades just before the recession. “And if we now look at the difference, we have to conclude that it is now also negative,” he says.

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However, it should be noted that this divergence only became negative in October 2022. “And the past tells us that when this divergence becomes negative, a 12-month recession often follows,” says Mojácic. “So if you continue from October, the US economy should enter a recession this fall.”

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