The Federal Reserve has raised interest rates three times since March, and in June, it initiated the largest interest rate hike since 1994. The target range for the federal funds rate has now been increased to between 1.5% and 1.75%.

St. Louis Federal Reserve Chairman James Bullard, known as the "Hawk King," reiterated on June 24 that the Federal Reserve should raise interest rates to 3.5% by the end of 2022. He further stated that once U.S. Treasury yields rise enough to exert downward pressure on inflation and deflationary forces take the lead, the Federal Reserve may cut interest rates. He previously estimated that bringing the inflation rate down from near a 40-year high and said that interest rate hikes could be reversed by the end of next year or in 2024.

The Atlanta Fed's GDPNow model's latest estimate for the U.S. second-quarter real GDP growth (annualized rate adjusted for seasonal variations) is 0.0%.

Meanwhile, the International Monetary Fund (IMF) lowered its U.S. economic growth forecast on June 24, predicting that the U.S. gross domestic product will grow by 2.9% in 2022, lower than the 3.7% forecasted in April. The 2023 U.S. economic growth forecast was revised down from 2.3% to 1.7%, and it is now expected that economic growth will fall to 0.8% in 2024. It is worth noting that in October last year, the IMF predicted that the U.S. would grow by 5.2% in 2022, and according to the latest forecast, it can be seen that the U.S. economy is indeed deteriorating.

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IMF Managing Director Kristalina Georgieva said that price stability is important for protecting U.S. income and sustaining growth, but U.S. consumers may face "some pain" in achieving this goal. According to the Federal Reserve's interest rate hike forecasts, the U.S. economy is currently facing the primary task of suppressing inflation at the cost of sacrificing growth.

Data shows that from March to May, the U.S. CPI rose by more than 8% for three consecutive months, with a 8.5% increase in March, an 8.3% increase in April, and a 8.6% increase in May. Both March and May set 40-year highs. Bullard said it is too early to say that U.S. inflation has peaked.

Goldman Sachs strategist Chris Hussey said that so far, the Federal Reserve has not taken enough interest rate hikes to suppress inflation, and the Federal Reserve's interest rate hikes may have to be more than previously expected. This also sends a signal that the Federal Reserve will continue to raise interest rates.

Billionaire Bill Ackman believes that the Federal Reserve's determination to raise interest rates has not been taken seriously and implies that interest rates may soar to more than 5% next year. Ackman said on June 4, "U.S. inflation is out of control, and inflation expectations have decoupled."

"My prediction is: The Federal Reserve is serious," Ackman said, expecting the Federal Reserve to raise interest rates by 75 basis points or more in July and by 50 basis points or more in subsequent meetings until inflation clearly slows down and approaches the 2% target.

While raising interest rates, since entering June, the Federal Reserve has been shrinking its balance sheet at a rate of $47.5 billion per month, and by September, it will reduce $65 billion in U.S. Treasury bonds and $30 billion in MBS per month. Federal Reserve Chairman Powell said on June 24 that the balance sheet will eventually be reduced by about $2.5 to $3 trillion. This further indicates that the Federal Reserve may take interest rate hikes and balance sheet reduction at all costs to suppress U.S. inflation under the guise of starting this round of monetary milestones.It should be understood that the Federal Reserve is not the Federal Reserve of the U.S. economy, but a joint institution composed of several banks in the United States. The liquidity released since the pandemic will sooner or later be retracted to make a profit. It seems inevitable that the Federal Reserve will stop alleviating the U.S. economy, and while raising interest rates, it will also stop taking over U.S. Treasury bonds. In this way, against the backdrop of many central banks around the world that have already started to reduce their holdings of U.S. Treasury bonds, it is undoubtedly a double blow to the heavily indebted U.S. economy.

According to the latest International Capital Flows Report (TIC) released by the U.S. Department of the Treasury on June 16 (which has a two-month lag), foreign official institutions sold a total of $158.3 billion in U.S. Treasury bonds in April this year. In March this year, foreign buyers sold a total of $97.3 billion in U.S. Treasury bonds. That is to say, in March and April this year, foreign buyers have cumulatively sold $255.6 billion in U.S. Treasury bonds. It can be seen that U.S. Treasury bonds with a total value of about 1.7 trillion yuan have been sold by foreign buyers.

Analysts say that many central bank institutions around the world have chosen to withdraw dollar assets in advance before the Federal Reserve's large-scale interest rate hikes and balance sheet reduction. Among them, at least 27 countries including China, Japan, the United Kingdom, Ireland, Luxembourg, Switzerland, Belgium, France, Brazil, Canada, India, Singapore, South Korea, Norway, Germany, the Netherlands, Thailand, Israel, the Philippines, Mexico, Sweden, Kuwait, Italy, the United Arab Emirates, Vietnam, Poland, and Chile sold U.S. Treasury bonds in April, and many countries have shown a phenomenon of selling U.S. Treasury bonds for at least two consecutive months.

For example, as the largest overseas holder of U.S. Treasury bonds, Japan sold an unprecedented $73.9 billion in U.S. Treasury bonds in March and $13.9 billion in April. Japan sold a total of $87.8 billion in U.S. Treasury bonds for two consecutive months, equivalent to 587.3 billion yuan in U.S. Treasury bonds. Japan's holdings have fallen to $1.2185 trillion, the lowest level since January 2020. The U.S. financial website Zerohedge said that Japan is selling U.S. Treasury bonds at an epic speed.

It is worth mentioning that the latest report from the U.S. Department of the Treasury also shows that China sold $36.2 billion in U.S. Treasury bonds in April, and its position fell to the lowest since June 2010, to $1.0034 trillion. Among the main overseas holders of U.S. Treasury bonds, China's selling strength is the greatest. And from December 2021 to April this year, China has been reducing its holdings of U.S. Treasury bonds for five consecutive months.

Not only that, but BWC Chinese website checked historical data and saw the following figure: In December 2017, China held $1.1849 trillion in U.S. Treasury bonds at the time, making it the largest overseas bond holder in the United States, with Japan ranking second. Compared with the $1.0034 trillion held in April this year, it means that in more than four years, a total of $18.15 billion in U.S. Treasury bonds have been sold, equivalent to a total of 120 billion yuan in U.S. Treasury bonds sold during this period.

The U.S. media Zerohedge analyzed that when the Federal Reserve has also started to ignore U.S. Treasury bonds by raising interest rates and reducing the balance sheet, the bottom card of the U.S. debt economy seems to be being revealed, and the risk of U.S. default has increased, and some major buyers may clear U.S. Treasury bonds. This is undoubtedly a very difficult financing road for the U.S. economy, which is constantly monetizing U.S. Treasury bonds and can hardly move without debt.

Billionaire Jim Rogers believes that the sustainability of the U.S. debt economy is in the hands of a few major buyers around the world. Regarding the Federal Reserve's cessation of taking over U.S. Treasury bonds, Rogers intriguingly said, "Don't fight against the Federal Reserve, but in the end, we (the U.S. economy) will pay the price because the United States is the world's largest debtor, and debt is everywhere."

U.S. media cited Goldman Sachs analysts as believing that in the case of uncontrollable inflation, U.S. Treasury bonds and other dollar assets will continue to lose the value of "American money," which will undoubtedly intensify the selling tide of U.S. Treasury bonds and other dollar assets. It is expected that a final value of $31 trillion, equivalent to 207 trillion yuan, will be withdrawn from the dollar market and转向收益更高的市场. Rogers believes that due to the United States' efforts to increase the risk of U.S. risk assets and debt, the U.S. market may enter the Great Depression minefield.

As of June 26, the total U.S. federal debt has reached a historical high of $30.54 trillion, about 130% of the U.S. GDP. The U.S. Department of the Treasury has hinted several times in the past 24 months that it may consider issuing 100-year U.S. Treasury bonds, which means that the U.S. economy cannot get rid of its dependence on debt.In response to this, the Treasury Borrowing Advisory Committee (TBAC) of the United States has questioned, who will buy U.S. Treasury bonds in the future? Meanwhile, Stuart Varney, a host on Fox Business Network, pointed out that the United States has never defaulted on its debt. If it were to do so, who would lend money to the United States again?

It is evident that the United States may have sensed the risk of a debt crisis at this time, making it crucial to maintain good creditworthiness in debt repayment. At any time, the U.S. economy has no right and dare not default on any U.S. Treasury bond accounts; it must repay and honor its debts and interest as agreed.