Part 7/11:
The key question is whether corporations will move from a hiring freeze to widespread layoffs, which would push unemployment higher and likely prompt the NBER to declare a recession. The yield curve's position—around zero—places monetary policy at a pivotal crossroads. A significant re-steepening of the curve could stimulate growth, preventing a recession. Conversely, if the yield curve inverts again, a downturn becomes almost inevitable.
The Fed’s dual mandate complicates the picture. While a flat or slightly inverted yield curve signals a potential recession, the Fed also monitors inflation closely. Currently, inflation remains a concern, nervously balancing between cooling off and warming up again.