US President Trump announced before the release of gross domestic product (GDP) data last Friday that economic growth will be strong in the second quarter. Finally, the data released by the US government last Friday showed that the US economy achieved the fastest growth rate since 20 14 years in the second quarter, but it was slightly lower than market expectations. Trump attributed it to his economic policies, including the largest tax reform and deregulation efforts since the Reagan era.
However, in the face of such transcripts, the financial market did not fully buy it. After the data was released, the yield of US Treasury bonds fell and the yield curve tended to be flat. Traders' bets on the federal funds rate do not seem to believe that economic growth and inflation will remain strong enough to meet the Fed's demand for a gradual rate hike.
Last month, the Federal Reserve announced that it would raise the target range of the federal funds rate by 25 basis points to 1.75% to 2%, which is the second rate hike this year. At the same time, the expected number of interest rate hikes this year will be raised from 3 to 4, that is, the interest rate will be raised by 50 basis points this year. However, the current price of federal funds futures is only about 42 basis points.
In addition, the Fed's bitmap predicts that this round of interest rate hikes will last until 2020, and most officials expect the Fed to raise interest rates 1 2 times in 2020. However, the spread between the latest Eurodollar contract due in February 20 19 and the Eurodollar contract due in February 2020 has once again dropped to zero. Earlier this month, this spread was once upside down, indicating that short-term bond market traders do not expect the Fed to raise interest rates at all in 2020.
Some insiders pointed out that with the gradual fading of the tax reduction effect in 20 17 years, enterprises will reduce their expenses under the influence of overseas tariffs or the strengthening of the US dollar, and the Federal Reserve will further raise interest rates, which will weaken the momentum of US economic expansion that has lasted for 9 years. The second quarter may be the best performance of the world's largest economy, and few economists expect it to achieve the goal of sustained growth of 3% as Trump hopes.