Unexpectedly Intriguing!
14 June 2018

The risk of a national recession beginning in the United States anytime in the next year, from 13 June 2018 through 13 June 2019, has slightly increased by 0.2% over the last six weeks, where the odds now stand at 0.8%.

Obviously, that's still a very low probability, where the increase is mainly attributable to the Fed's recent series of quarter point rate hikes. At the same time, a very slight narrowing of the U.S. Treasury yield curve, as measured by the spread between the 10-Year and 3-Month constant maturity treasuries, has also made a small contribution.

Our Recession Probability Track shows where the recession risk for the U.S. stood at the end of 13 June 2018.

U.S. Recession Probability Track Starting 2 January 2014, Ending 13 June 2018

Since the Fed acted to hike short term interest rates in the U.S. again at the conclusion of its two-day June 2018 meeting, boosting the Federal Funds Rate to a new target range of 1.75%-2.00%, the risk of recession will soon rise above the 1% threshold.

But perhaps more significantly, the Fed indicated that it would be likely to increase short term interest rates in the U.S. twice more in 2018, near the end of the third quarter of the year and again near the end of the fourth quarter of the year.

That change in outlook was almost immediately reflected in the future expections of investors, as measured by the CME Group's Fedwatch tool, where the probability of a rate hike in the fourth quarter of 2018 increased from 46.5% at the beginning of the day to 52.2% by the close of U.S. markets.

If you want to get a good sense of where the recession probability track is likely to head next, you are more than welcome to take advantage of our recession odds reckoning tool, which is also based on Jonathan Wright's 2006 paper describing a recession forecasting method using the level of the effective Federal Funds Rate and the spread between the yields of the 10-Year and 3-Month Constant Maturity U.S. Treasuries.

Just plug in the most recent data available, or the data that would apply for a future scenario that you would like to consider, and compare the result you get in our tool with what we've shown in the most recent chart we've presented. The links below present each of the posts in the current series since we restarted it in June 2017.

Previously on Political Calculations


About Political Calculations

Welcome to the blogosphere's toolchest! Here, unlike other blogs dedicated to analyzing current events, we create easy-to-use, simple tools to do the math related to them so you can get in on the action too! If you would like to learn more about these tools, or if you would like to contribute ideas to develop for this blog, please e-mail us at:

ironman at politicalcalculations.com

Thanks in advance!

Recent Posts

Indices, Futures, and Bonds

Closing values for previous trading day.

Most Popular Posts
Quick Index

Site Data

This site is primarily powered by:

This page is powered by Blogger. Isn't yours?

CSS Validation

Valid CSS!

RSS Site Feed

AddThis Feed Button


The tools on this site are built using JavaScript. If you would like to learn more, one of the best free resources on the web is available at W3Schools.com.

Other Cool Resources

Blog Roll

Market Links

Useful Election Data
Charities We Support
Shopping Guides
Recommended Reading
Recently Shopped

Seeking Alpha Certified

Legal Disclaimer

Materials on this website are published by Political Calculations to provide visitors with free information and insights regarding the incentives created by the laws and policies described. However, this website is not designed for the purpose of providing legal, medical or financial advice to individuals. Visitors should not rely upon information on this website as a substitute for personal legal, medical or financial advice. While we make every effort to provide accurate website information, laws can change and inaccuracies happen despite our best efforts. If you have an individual problem, you should seek advice from a licensed professional in your state, i.e., by a competent authority with specialized knowledge who can apply it to the particular circumstances of your case.