The Federal Reserve did this week clarify its near-term plan, but there is still plenty of uncertainty for investors in the long-term.

Initial reactions to Fed’s announcement were positive. post-meeting statement WednesdayIt stated that it would fight against rising inflation and accelerate its reduction in monthly bond purchases. In addition, it was likely to raise interest rates by three times by 2022.

However Thursday’s market actionIt was less convincing with rate-sensitive stocks dropping sharply, and government bond yields falling, which would have been expected in light of the Fed’s tighter monetary stance.

A reason why the markets moved, particularly in bonds, may be that they aren’t sure that the Fed can accomplish what it projected in its future projections.

Charles Schwab chief fixed income strategist Kathy Jones stated that the Fed may not be able to increase rates as high as they claim without inverting yield curves and slowing down economy. The market is telling us that the Fed has limited scope beyond two to three rate hikes.

From the “dot plot” of projectionsOne thing that was clear from 18 Federal Open Market Committee members is the willingness of the Fed to do more than just two increases.

Each member predicted at least one rate increase in 2022. Two members even suggested four. The majority of members saw the Fed approving three quarter-percentage-point hikes next year, followed by three more in 2023 and two in 2024.

Jones is concerned that Jones’s outlook may be too aggressive given the many challenges facing the economy. the ongoing pandemicBecause of the workforce and demographic limitations, inflation and rates have remained under control for over a decade.

She said that “Pushing interest rates up so significantly can be quite difficult, without causing financial conditions to become tighter than they want,”

Rates could be raised but not increased beyond what is necessary the Fed’s credibilityto fight inflation and inflame more concerns about asset bubbles. The Wednesday FOMC statement saw strong market reaction, sending stock prices on a huge rally. This was a result of both relief and concern that the FOMC was not too hawkish about monetary policy. However, the Fed had limited scope to tighten financial conditions.

Inflation running at a 39-year highFinding the balance between stabilizing price and supporting the economy is difficult.

Mark Cabana from Bank of America, head of U.S. rate strategy, stated that the Fed had been behind the curve “in our view” in a memo.

Cabana said, “The Fed’s new policy was highly nonlinear and creates a dangerous endgame.” “The Fed must have a neutral policy policy, and not an over-stimulative zero interest rate or massive balance sheet, once they achieve their goals.” The Fed appears to have already achieved its goal.

Chairman Jerome PowellAt his news conference after the meeting, he stated that policymakers had just begun discussions on reducing their holdings. This process will begin after the taper has ended and not until at least a handful of rate increases have been completed by the Fed.

It’s still a potential problem in Fed efforts to create a soft landing after monetary policy has become accommodative at an unprecedented level. The markets revolted after Powell claimed that the Fed was using “autopilot” to tighten the market during a period of weakening in the U.S. Economy.

Krishna Guha is the head of Evercore ISI’s central bank strategy and global policy. He says it all fits into the “Powell conundrum”, which involves trying to control inflation, while still supporting the economy in a difficult period.

Guha wrote in a note, “Relatively aggressiveQT may be necessary if Fed over time doesn’t get traction on both the longer end and wider financial circumstances.” This is the obvious aspect in which investors should consider the “Powell Conundrum”. However, it is important to remember that this pertains more to the through-2022 timeline and not just the coming weeks, or months.

The ride for markets will continue, but it could become quite tense, especially after Fed officials return on the public dais to give policy speeches. CNBC will air John Williams, the New York Fed president, on “Squawk Box,” Friday morning at 8:30 AM. ET.

Christopher Whalen (chair of Whalen Global Advisors) stated that “going through the motions to fight inflation could cause quite some short-term volatility.”

Whalen predicts that the Fed would be willing to accept markets’ demands, even if it were restrictive in its policies.

He said, “The truth is that America needs inflation to maintain political peace.” This guy is not going to do a lot in the way of fighting inflation. [Powell]He’ll fold if there is a market crash.”