The inverted yield curve serves as a significant recession indicator, evolving from a predictive tool to a mechanism that actively influences economic behavior and growth.
Campbell Harvey noted that the inverted yield curve has accurately predicted the last eight recessions since the 1960s, with no false positives, highlighting its reliability.
He explained that the current inverted yield curve can cause CEOs to delay major investments, showcasing its ability to change business leaders' behavior towards risk.
Harvey contended that the Fed's tightening has inverted the yield curve, which needs correction to avoid sudden economic downturns when companies are unprepared.
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