The dismal US economic data released last night undoubtedly cast a shadow over the US economic development.

Total sales of new homes in the United States fell to the lowest level since the beginning of the epidemic in April, the biggest decline in nearly nine years. The initial value of Markit composite PMI in the United States in May was 53.8. the previous value was 56 and is expected to be 55.5.

It was previously reported that US GDP fell at an annualised rate of 1.4 per cent in the first quarter, below analysts' expectations of 1 per cent growth and the worst performance since the 2020 epidemic.

Chris Williamson, chief business economist at S&P Global Inc., said the data showed that the momentum of US economic growth had weakened further recently. Goldman Sachs Group and Bank of America also predicted a recession in the US economy.

Concerns about the economy are also reflected in market performance, with risk aversion rebounding again, investors pouring into bonds and rising bond prices, causing yields to fall, while US stocks are still suffering a continued sell-off.

So here's the picture, with bond yields falling as the S & P 500 declines (bond prices are inversely proportional to bond yields).

Or is the Fed really considering "pigeons"?

In the face of the pressure of the recession, some economists have called for intervention on the supply side, arguing that we cannot rely on the Fed to raise interest rates:

Joseph Eugene Stiglitz, the Nobel laureate in economics, said at the annual meeting of the World Economic Forum in Davos this week.If the US economy is to recover, it will need to intervene more on the supply side, not through the Fed to raise interest rates, which will not be able to control inflation.

Some Fed officials have recently sent out some "dove" signals:

After throwing out the idea of "suspending interest rate hikes in September" yesterday, Raphael Bostic, chairman of the Atlanta Fed, published another article urging the Fed to be cautious in tightening policy.

Even Eagle King St. Louis Fed Chairman Brad, who wants to raise interest rates to 3.5% this year, has said that if inflation is brought under control, the Fed could cut interest rates as early as next year.

The market expects the path of interest rate hikes to be more moderate in the future. what do institutions think?

At present, the market has fully digested the expectation of raising interest rates, and even began to expect a moderate increase in interest rates:

• The market now expects the interest rate at the end of the fed's current rate-raising cycle to be 2.95% (which is expected to fall further), down from 3.1% on Monday and even lower than the 3.5% at the beginning of the month.

• Although interest rates are still expected to rise by 50 basis points each at the next two meetings, the probability has fallen to 68 per cent from 82 per cent on Monday.

• Interest rate increases at the next three meetings are expected to be 134 basis points, down from the previous 141 basis points (that is, expectations of a 50 basis point increase in September have largely receded).

• The expected length of the austerity cycle has shrunk sharply. A few months ago, traders expected the Fed's "terminal interest rate" to reach next September, but the current estimate has been adjusted to June next year, and even March is under discussion.
  

Blackrock, the largest asset management agency in the world, also holds the same view.The Fed is likely to change its previous absolutely hawkish stance again later this year without allowing the economy to slide into recession:

The depressed macro environment complicates the actual situation of the global economy.As a result, a modest shift in the Fed's policy stance is expected by the end of the year.The Fed will raise interest rates to around 2.5% by the end of the year, after which it will suspend rate hikes to assess the subsequent impact.

Guosheng Securities has previously issued a research report saying that if the Fed raises interest rates at the pace currently expected by the market, that is, if it raises interest rates by more than 200bp this year, it may stop raising interest rates in early 2023. But the analysis is more inclined to thinkAs the US economy slows and inflation falls, the pace of subsequent interest rate increases is likely to slow.

The previously announced US CPI rose 8.3% in April from a year earlier, which was lower than market expectations, but it also showed signs of a pullback in US inflation. Beijing time will be announced this Friday night.April Core PCE Price Index annualized rateIt is also a major indicator of inflation by the Federal Reserve and deserves to be paid close attention to.

In addition, tonight, the Federal Reserve FOMC will release the minutes of the May monetary policy meeting. Although the minutes of the May monetary policy meeting will not be announced, it is also of great reference value as the Fed's "expectation management" tool.

The answer to the path of raising interest rates in the future is about to be revealed.