Federal Reserve's 'credibility at risk' -CIO

STORY: The Federal Reserve raised its target interest rate by a quarter of a percentage point on Wednesday (Feb. 1), yet continued to promise "ongoing increases" in borrowing costs as part of its still unresolved battle against inflation.

Federal Chairman Jerome Powell said he is not fully sure where the central bank will stop with rate rises as it presses forward with its efforts to cool inflation.

After the statement, money markets were betting on a terminal rate of 4.94% in June compared with 4.92% just before but U.S. futures were still pricing in rate cuts this year with the fed funds rate seen at 4.486% by the end of December, the same as before the meeting.

Stocks, modestly lower ahead of the Fed rate decision, turned sharply higher as Powell spoke, with the benchmark S&P 500 index climbing about 1% on the session.

"In order for the Fed to fix this," said Nicholson, "they're just going to have to allow the market to continue fighting them, and ultimately be the bearer of bad news and drop the hammer on markets and really make them pay for going against the Fed."