Fed talks about further rate hikes, but the market thinks otherwise

At the moment, there are significant contradictions in the assessment of the U.S. Federal Reserve's (Fed's) actions. On the one hand, Fed Chair Jerome Powell is talking about further raising interest rates and fighting inflation. On the other hand, investors on Wall Street have an exceedingly different view.

After the Fed's interest rate hike of 0.5%, Powell is trying hard to dispel an assumption that suddenly appeared. The assumption is that the Fed will give up trying to reduce inflation, despite the easing of price pressures and considerable fears of job losses and recession.

Powell assured that the Fed’s course would remain the same. Thus, as long as the existing problem persists, the Fed won’t change its policy.

Lindsey Piegza, chief economist at Stifel Nicolaus & Co, believes the market is questioning the Fed's hawkish position as the market itself probably expects inflation to lower faster than it was predicted

However, Powell himself said that the Fed is still determined to reduce inflation to the target level of 2%. Thus, despite investors’ assumptions, the bank has no plans to cut rates over the next year.