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BIS says recession hunters should focus on the state of the financial cycle - Reuters

Recent weeks saw a section of the US Treasury yield curve "invert", triggering recession fears.

The Bank for International Settlement (BIS) however, believes that studying the state of the financial cycle does a better job of predicting a recession than the yield curve.

Key points (Source: Reuters)

Borio, Mathias Drehmann and Dora Xia said their study had found that since the early-980s, downturns typically followed financial booms rather than significant monetary tightening.

Steadily rising US interest rates my push up dollar funding costs.

The market tensions we saw during this quarter were not an isolated event. Monetary “policy normalization was bound to be challenging, especially in light of trade tensions and political uncertainty.

Recent sharp selloffs across global financial markets are probably the first of many, as investors adjust to tighter monetary conditions.

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