Investors are asking this question in the wake of a series of stronger-than-expected economic data and higher inflation readings in the first quarter of this year.

The latest surprises were March data showing a 303,000 increase in nonfarm payrolls and the Consumer Price Index inflation report that showed the headline rate increased to 3.5 percent over a year ago.

Whereas investors anticipated six cuts in the federal funds rate at the start of this year, the bond market is now pricing in only two cuts. While this is below the three cuts that Fed officials envision, some investors suspect the Fed will have to alter its assessment at some point.

Amid this, the 10-year Treasury bond yield has increased by nearly 70 basis points this year to 4.55 percent while the stock market rally has stalled this month.

As fears of recession have faded, investors are now debating whether the economy will attain a “soft landing” or “no landing.” The key difference is whether inflation will approach the Fed’s target of 2 percent, or stay around 3 percent.

According to a recent Deutsche Bank survey, 45 percent of investors now believe a “no landing” scenario is the most likely outcome. This compares with 38 percent of respondents expecting a “soft landing” and 17 percent foreseeing a recession this year.

Several considerations underlie the difference in views.

One issue is whether inflation will continue to........

© The Hill