Yield Curve Pioneer Campbell Harvey Warns of Possible Recession in 2024
Duke University finance professor Campbell Harvey discussed the state of the U.S. economy and the Federal Reserve’s interest rate strategy on ‘The Claman Countdown’.
Warning Against Rate Hike
- Harvey warned the Federal Reserve against raising rates again later this year.
- He believes a recession might still be coming in 2024.
- Harvey mentioned that current Bureau of Labor Statistics and GDP figures might be distorted by nationwide issues like rising credit card debt.
The Inverted Yield Curve
- The yield curve, which depicts the yields for long-term and short-term bonds, remains inverted.
- Three-month treasuries appear to be paying out more than longer-term T-bills.
- Harvey stated that the average length of a yield curve inversion is around 13 months.
- He projected that the inversion would reach its average length sometime in 2024, indicating a recession.
Consumer Spending and Credit Card Debt
- Harvey explained that the robust GDP growth in 2023 is driven by consumer spending.
- However, as consumers rely more on credit, credit card debt with higher interest rates is rising steadily.
- He believes that consumption will not save the economy in 2024.
Potential Rate Hike
- There is a one-third chance of another 0.25% rate hike.
- Harvey argued that raising rates again would be a catastrophic error.
- He believes the inflation numbers are false and that shelter inflation is disconnected from actual housing prices and rental costs.
Predicted Market Impact
- Harvey warned that raising rates again would push the U.S. markets into a “hard landing”.
Based on Campbell Harvey’s analysis, the Federal Reserve should be cautious about raising rates again, as it could potentially lead to a recession in 2024 and negatively impact the U.S. markets.
- Yield curve pioneer Campbell Harvey
- Three-month treasuries
- Yield curve inversion
- CFO’s expect economy will be worse in a year
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