March 29, 2019 / 5:27 PM / 25 days ago

Quarles: Current yield curve not 'harbinger' of recession

Randal Quarles, Federal Reserve board member and Vice Chair for Supervision, takes part in a swearing-in ceremony for Chairman Jerome Powell at the Federal Reserve in Washington, U.S., Febuary 5, 2018. Picture taken February 5, 2018. REUTERS/Aaron P. Bernstein

NEW YORK (Reuters) - The recent inversion of parts of the Treasury yield curve are not a worrisome signal of coming recession, Fed vice chairman Randal Quarles said on Friday, citing factors like the size of the Fed’s balance sheet as partly the cause of it.

The Fed’s asset holdings may hold down longer-term rates, while the Fed’s rate actions push up short-term securities, making the curve naturally flatter, he said.

An inverted curve “historically in the United States has been a signal of recession. Ought it to be now? You have to look at the symptom and look behind to some theory as to what might be causing it...I don’t view it as much of a harbinger,” Quarles said.

Reporting by Howard Schneider; Editing by Chizu Nomiyama

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