A red-flashing recession indicator in the bond market only adds to the pressure the Federal Reserve will face when it meets next month to deliver what markets anticipate will be another rate cut.
The spread between yields on the 2- and 10-year Treasurys flipped Wednesday morning as the shorter-duration debt rose above the level of the benchmark rate. That’s a classic recession indicator, predicting the past seven periods of negative U.S. growth.
The Fed already had been expected to cut its own funds rate by a quarter percentage point. But with economic signals getting increasingly negative, questions are bound to arise over whether the central bank will act even more aggressively.