DataTrek’s Nicholas Colas said: “It is clearly saying high short term interest rates are going to cause a recession in the next 12 months. Moreover, these odds are very likely to increase.” 

Colas referenced the model’s 60 year track record, showing nine times out of 11, a probability reading over 30% was able to accurately predict a downturn.

The model measures the difference between yields on the 3-month and 10-year Treasury – similar to the 2-10 Treasury curve, a bellwether of a recession when the curve is inverted.

Analysts deem the 3-10 Treasury curve a “more accurate” predictor, as does Fed Chair Jerome Powell, who has termed it his preferred recession warning.

“It is clearly saying high short term interest rates are going to cause a recession in the next 12 months. Moreover, these odds are very likely to increase,” Colas said, referring to the expected 50-basis-point hike at next week’s Federal Open Markets Committee meeting.

While more moderate than recent the streak of 75-basis-point hikes, the probability model suggests markets already see rates as too restrictive, meaning there could be a Fed-induced recession, or as Colas calls it, a “Powell recession.”

“Chair Powell will almost certainly have to answer a question about the likelihood of a recession at his post-FOMC press conference next week. He might cite the NY Fed’s model and say ’38 percent.’ But, based on the model’s history, the real answer is ‘close to 100 percent,'” Colas told CNBC.

As Yahoo News reported Tuesday, the U.S. housing market isn’t just facing a recession, it’s already in one:

“The Housing Market Index, a closely watched industry metric that gauges the outlook for home sales, declined to 33 in November on a hundred-point scale, its lowest level in a decade, save for the first dystopian month of the pandemic. Anything under 50 spells trouble."

The housing market is already in recession and has been since midsummer, according to the National Association of Home Builders, which publishes the Housing Market Index with Wells Fargo.