The bank's strategists pointed to what is known as the inversion of the two- and 10-year US Treasury yield curve, which has successfully predicted several recessions, most recently in 1990, 2001 and 2008.

In theory, the yield curve should be tilted upwards, and when short-term interest rates are higher than long-term interest rates, they cause a phenomenon that Wall Street calls the inverted yield curve, which preceded recent recessions in the US.

The difference between two- and 10-year Treasury yields just fell to a full percentage point last week, representing the biggest reversal in more than 40 years.

The bank noted that the inversion of the yield curve more reflects a difficult falling coming inflation rather than the economy, and they see the U.S. economy still avoiding a sharp deflation.

Analysts said in a note that the shape of the bond yield curve predicts lower inflation rather than a sign of deteriorating growth.

Bank analysts said in a note: "While the inversion of the curve near historical boundaries ... "We believe that the shape of the curve is more of a function of expectations of lower inflation than a deterioration in growth."

The bank said this was because real forward yields, which represent the market's expectations for inflation-adjusted bond yields, saw only a "modest decline" in the short term.

This suggests that investors expect the Fed to roll back interest rates slowly – a move they are unlikely to make if the economy faces a high risk of recession.

Markets now expect the Federal Reserve to raise interest rates by an additional 25 basis points at this month's monetary policy meeting, a move that would raise rates to 5.25-5.5%.