OUR Federal Reserve it may soon reverse course to tighten monetary policy and, in short, be forced to cut interest rates to support the world’s largest economy.

The reason, of course, will be a looming recession in the world’s largest economy, caused not so much by the decline in hiring in US companies, but primarily by US government bond yields, which are beginning to betray investors’ concerns in the near future. future.

At least that’s the case with one of the most important signs of concern for the US Federal Reserve: a yield curve inversion is what economists call a situation in which short-term bond yields move up, causing them to narrow their difference from long-term bond yields.

When the economy is calm, and even more so when the economy is growing, yields on long-term bonds are higher than on short-term bonds, since long-term debt is surrounded by much more uncertainty.

However, when short-term debt yields increase and their spread to long-term debt yields narrows, it becomes clear that the market is expecting a recession.

Since November, this distance has been significantly reduced, and in recent days it has decreased even more. Over the past year, Fed Chairman Jerome Powell has pointed out that the most reliable warning of a looming recession is precisely this shift in the US Treasury yield curve.

Indeed, fears of an impending recession have resurfaced in recent weeks, largely due to the turmoil in the superpower’s banking system caused by the collapse of the regional Silicon Valley Bank and investors’ fears that the turmoil will trigger a credit crunch and hurt development.

Over the past year, the Fed has actively initiated and promoted a move to tighter monetary policy and has repeatedly urged the market to raise rates further to curb inflation.

But looking at how bond yields are changing, market participants believe that the increase in interest rates has already begun to hurt economic growth and reduce discounts during the year. The impression that the economy has already suffered from a significant and sharp increase in the cost of borrowing is confirmed by data released yesterday on the situation in the US labor market.

In March, US businesses added 236,000 jobs to their payrolls. This number signals a hiring slowdown and shows that the Fed’s aggressive rate hikes are beginning to have a clear impact on the economy.

The impression that the economy has already suffered from a large and sharp increase in the cost of borrowing is confirmed by the March hiring data.

And as Citi Group analysts point out, when you look at bond yield curves, recent economic performance, the money supply and the slowdown in the labor market, you can understand why market participants think there is something wrong with the Fed’s reasoning. in particular, his belief that he should continue to raise dollar rates. In keeping with its policy of curbing inflation, the Fed raised interest rates by another 25 basis points last month. But as the US regional bank mini-banking crisis erupted, the US Federal Reserve signaled that it was nearing completion of this shift in tight monetary policy and could soon stop raising interest rates. This mini-banking crisis has alarmed business leaders, investors and economists, many of whom believe that even as it comes to an end, it could bring recession risk closer to the superpower. Among them is Jamie Dimon, CEO of JP Morgan Chase & Co., who predicts the mini-banking crisis is coming to an end but insists it has increased the risk of a recession. Jamie Dimon is 67 years old and has been running JP Morgan Chase since 2005. He is the only CEO to survive the 2008 global financial crisis as the chief executive of a bank and still remain at the head of the banking giant.