Fed's Daly says she is not 'freaked out' by yield curve inversion

FILE PHOTO: Mary Daly, President of the Federal Reserve Bank of San Francisco, poses after giving a speech on the U.S. economic outlook, in Idaho Falls, Idaho, U.S., November 12 2018. REUTERS/Ann Saphir.Ê

SAN FRANCISCO (Reuters) - San Francisco Federal Reserve Bank President Mary Daly on Tuesday said she is “not freaked out” by the recent inversion of the yield curve on Treasury notes, because although in the past the rise of short-term rates above long-term rates has predicted recessions, it may not do so this time around.

For one, Daly said, there are many factors driving down long-term rates that have little to do with the health of the U.S. economy. And the Fed’s guidance on its expected interest rate path and its commitment to responding to economic data make it less likely that a recession will follow an inversion, she said.

But she said she hopes that businesses and consumers will not “freak out” over the inversion, because if they do, it could become a self-fulfilling prophecy.

Reporting by Ann Saphir; Editing by Leslie Adler