High short-term interest rates constitute relatively good evidence of a coming recession. The hard part is deciding what qualifies as high. “Higher than long-term rates” seems to get attention partly due to its ability to produce a clear threshold, rather than to anything optimal about the signal that’s produced by long-term rates.
Note that if recessions were easy to predict, they would be easier to avoid than they have been.
High short-term interest rates constitute relatively good evidence of a coming recession. The hard part is deciding what qualifies as high. “Higher than long-term rates” seems to get attention partly due to its ability to produce a clear threshold, rather than to anything optimal about the signal that’s produced by long-term rates.
Note that if recessions were easy to predict, they would be easier to avoid than they have been.