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MNI INTERVIEW: Fed Overtightened But Will Wait 'Til May-Harvey

(MNI) WASHINGTON

Fed's patience risks a downturn, said Campbell Harvey who developed the idea of the yield curve as a predictor of economic cycles.

The Federal Reserve has overtightened monetary policy and needs to start cutting interest rates soon in order to avoid a recession, but policymakers are likely to wait until May before they start reducing borrowing costs, Campbell Harvey, a former visiting scholar at the Fed's Board of Governors told MNI.

"The Fed pushed rates unnecessarily too high and to mitigate the risk of much slower growth or recession they need to reverse some of that," said Harvey, who pioneered research showing movements in the yield curve could predict economic turning points.

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The Federal Reserve has overtightened monetary policy and needs to start cutting interest rates soon in order to avoid a recession, but policymakers are likely to wait until May before they start reducing borrowing costs, Campbell Harvey, a former visiting scholar at the Fed's Board of Governors told MNI.

"The Fed pushed rates unnecessarily too high and to mitigate the risk of much slower growth or recession they need to reverse some of that," said Harvey, who pioneered research showing movements in the yield curve could predict economic turning points.

Keep reading...Show less