An inverted yield curve in the US bond market does not in any way indicate looming economic recession, Invesco chief economist John Greenwood said yesterday.
He said yield curve inversions, excess leverage, and the US-China trade war on their own will not cause recession. But if central banks tighten too much, recession could occur, he said.
He said indicators are often misleading as there have been numerous inversions but they have not been followed by recession. He cited instances in July-October 1966 and in October 1998.
He said Hong Kong's linked exchange rate system remains valid and should be supported.
On Wednesday, the greenback's exchange rate against the Hong Kong dollar fell below 7.84 at one point.
"We have seen in the past that whether the yuan is appreciating or depreciating, the Hong Kong dollar link to the greenback has been very effective," he said, adding there are hardly any reasons to change the linked exchange rate system.
Greenwood also predicted that China's real GDP growth would slow down this year.