Chart of the Day: The Probability of Recession Is Now 20%

Fed expert Tim Duy is getting seriously worried. Based on the movement of short-term and long-term interest rates, he thinks the chance of a recession in the next few months is getting very high:

Duy thinks the Fed needs to cut interest rates sooner rather than later:

So now I switch from analyst to commentator: The above leads me to the conclusion that the Fed needs to get with the program and cut rates sooner than later if they want to extend this expansion. Given inflation weakness and proximity to the lower bound, the Fed should error on the side of caution and cut rates now. Take out the insurance policy. It’s cheap. There will be plenty of opportunity to tighten the economy into recession should inflation emerge down the road.

This is probably sage advice.

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