The risk of a US recession in the next two years has risen to 40 percent, according to a Reuters poll of economists who also found a significant shift in expectations toward fewer Federal Reserve interest rate rises next year.
What has fueled concerns of a downturn is the flattening of the US yield curve – with the spread between two- and 10-year note yields falling to less than 10 basis points, the smallest gap since the run-up to the last US recession.
A flattening yield curve suggests investors believe economic growth and inflation will slow. A yield curve inversion has preceded almost all recessions over the last half-century.
The probability of a US recession in the next two years has jumped to 40 percent, according to the median of those polled, the highest since that question was first asked in May this year.
Before that, the last time such a high probability appeared in a Reuters poll was in January 2008, just eight months before the…