Former Federal Reserve Chairwoman Janet Yellen on Wednesday said it is unlikely the U.S. economy is entering a recession, though recent indicators signal increased risk.
“I think the answer is most likely no. I think that the U.S. economy has enough strength to avoid that,” Yellen said during an interview on Fox Business Network.
“But the odds have clearly risen and they are higher than I’m frankly comfortable with,” she added.
{mosads}On Wednesday, the yield on 10-year Treasury bonds dropped below the yield of 2-year Treasury bonds, indicating concern over long-term economic activity. That reversal, known as an inverted yield curve, is one of the best predictors of an economic recession.
Markets tanked, with the Dow Jones industrial average plummeting 700 points in mid-day trading.
But Yellen said that the yield curve could be responding to other forces.
“There are a number of factors other than market’s expectations about the future path of interest rates that are pushing down long-term yields,” she said.
Over the past week, Wall Street forecasters have increased the chances of a recession in the coming year.
Moody’s Analytics put the chances at more than 50 percent, while Bank of America pegged them at about a third.
An economic slowdown or recession during an election year could boost Democratic hopes of retaking the White House from President Trump in 2020.