Not only is the Fed's terminal rate futures higher than a week ago, but the pace of expected rate cuts has been delayed by almost three months from the previous week, meaning that the market expects the Fed to bring the terminal rate back down to 4.5% in December before the end of the year, for example, but this expectation has now been delayed and will not be seen until March of 2024.
I remember sharing my views on inflation in the U.S. and other mature economies last year. In any mature economy where inflation was once above 5%, it is a very difficult and challenging process to get back to 2%, including high unemployment, falling wages, weak corporate profits or even losses, and falling new order indexes.
But so far, I think the situation is not as expected by the Fed or the market, although the data we have seen for the time being is somewhat mixed, but we do not see the need for the Fed to take the lead in cutting interest rates, so this round of rate hikes I think is definitely much longer than we thought, and do not forget that the Fed is always half a beat or even a beat slower than the economic data, maybe then the data really turned weak, but the Fed Officials choose not to believe, but also continue to observe, the market does not believe, in the monetary decision to implement and need time to ferment, resulting in more potential risks originally unnecessary to bear will be exposed one by one.
At that time, the current market rebound I think may also be over, especially if the market found the wrong pricing, then it may have risen much higher, fell back down also more powerful.
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