The strikingly dovish tone of the FOMC's post-meeting statement sent stocks surging higher. But it also generated some conversation around "down-side concerns that the Fed 'knows more than we do,'" said Catherine L Mann, global chief economist at Citigoup.
Mann said, however, that her team's research indicates that concerns over growth will fade.
"Powell argued that future policy would be a function of data, and our economists' base-case is for strong domestic growth supporting two hikes in 2019," the economist said in a note.
Similarly, Lindsey Piegza, chief economist at Stifel, said the Fed probably isn't done for the year though it may not execute the planned two rate hikes in the current forecast. The fed funds rate currently is targeted between 2.25 percent and 2.5 percent, the result of eight quarter-point increases that began in December 2015.
As the year progresses, "continually solid domestic data and a reduced threat from overseas would likely create a thaw, allowing at least one further policy adjustment before the Fed throws in the towel," Piegza wrote.
The market still does not anticipate any rate hikes this year, and Citi strategists note that the Fed typically starts cutting rates eight months after the last increase. Current futures pricing points to a 25 percent chance of a quarter-point reduction by the end of the year, and no probability of a hike.
"What happens if we have a spate of unequivocally strong economic data?" Prudential's Krosby said. "I think you're going to start seeing the fed funds futures market signaling a rate hike, and probably the Fed will as well."
