WASHINGTON (Reuters) - U.S. Treasury Secretary Steven Mnuchin on Tuesday said he was not concerned the gap between short-term and long-term borrowing costs, or yield curve, adding that his remarks were not a comment on the U.S. Federal Reserve Bank or its actions.
“I, for one, am not at all concerned about the yield curve,” Mnuchin told CNBC in an interview. “I don’t think that’s a predictor of economic growth. I think it’s a market condition.”
“For now, having a flat yield curve with us issuing long-term debt is something we’re perfectly content with,” he added.
Economists weigh the yield curve as a possible predictor of recession risk since historically, when the gap inverts — with short-term rated higher than long-term ones — an economic downturn follows.
The macroeconomic debate is ongoing as the Fed has raised interest rates and is expected to continue to doing so at least for the next few quarters.
Last week, the Treasury yield curve reached its flattest level since 2007 as comments by Federal Reserve Chairman Jerome Powell affirmed expectations that it will continue raising rates.
U.S. President Donald Trump, in breaking with tradition of past administrations, has recently spoken out about the Fed. The Republican president criticized its rate increases and called on Fed Chairman Jerome Powell to do more to boost the economy.
The Fed’s Washington-based board are appointed by the president but the U.S. central bank is allowed to set monetary policy independently. Policymakers have said Trump’s comments have no influence on their decisions.
Reporting by Susan Heavey; additional reporting by Howard Schneider; Editing by Susan Thomas