Normally, we see the US Treasury yield curve slope rise dramatically after a recession. Except for after the shortest recession (2 months) in US history. Why?
With the Covid outbreak in early 2020, The Fed chose to repress interest rates with a vengeance by lowering their target rate to 25 basis points (yellow line) and massively expanding their Treasury and Agency MBS purchases (orange dotted line). As a result, the US Treasury yield curve slope had an anemic post-recession surge and has declined again to 103.39.
Oddly, The Federal Reserve overstimulated their balance sheet for the Covid epidemic which created the shortest recession in US history. .
But the stimulus remains. As does inflation and home price growth and rents.
This is indeed monetary Stimulypto.
Will this be acknowledged at The KC Fed’s Jackson Hole Monetary conference?
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