The Federal Reserve reaffirmed its 2018 projected path of an additional three 25 basis-point rate hikes at this week’s Open Market Committee meeting. I wrote last week that the announcement set the stage for an inversion of the yield curve by the end of next year.
This “yield curve will invert in 2018” story rose to prominence in recent weeks as many analysts made similar predictions. Where did this forecast arise from and under what conditions will it come to pass? Why might the yield curve steepen instead?