US rate hike ⇒ economic slowdown & price stabilization ⇒ rate cut

The market is watching for rate hikes leading to a recession and price stabilization followed by rate cuts, but judging from the 2-year Treasury yield, the future Federal Funds rate will be as follows.

If someone who holds U.S. 2-year Treasuries is thinking about scenarios like the yellow-masked ones above, they would not sell the 2-year Treasuries at a yield higher than the red interest rate. Thus, the 2-year Treasury yield will resemble the values shown in red.
In short, whether you hold them for two years or roll them over for two years in the short term, the total principal and interest two years later will be the same, so the yield on the 2-year Treasury is determined accordingly.

If you chart it, the red portion represents the market’s expected future FF rate.

The market’s terminal rate (the final level of rate hikes) is not high (about 3.25–3.5%). Moreover, rate cuts are expected to occur relatively quickly.
That alone suggests that a recession and price stabilization are expected to occur easily.

However, the current economic trend and price trends are not normal (due to the COVID-19 pandemic, Russia-Ukraine war, etc.), and they differ from the disinflationary environment we have experienced over the last 40 years. In other words, demand is not the driver of prices in this situation.

Even the market probably does not fully understand.
I do not think that rate hikes will peak at this level.