Yield curve predicts future economic activity with practical guidelines for all.
The yield curve, which shows the difference between long-term and short-term interest rates, can predict future economic activity. Past research has shown that changes in the curve have signaled previous recessions. However, not much attention has been given to using the yield curve as a real-time forecasting tool. This analysis provides practical advice on how to create and interpret the yield curve indicator to predict economic trends accurately.