The stock market slide is unlikely to budge the Fed from tightening

cnbc.com:

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The current slide in the stock market may be spooking some investors, but it's seen as unlikely to scare Federal Reserve officials enough to deviate from their current policy track.

In fact, Wall Street is looking at a Fed that might even talk tougher this week as it is seemingly locked in a fight against generational highs in inflation amid market turmoil.

Goldman Sachs and Bank of America both have said in recent days that they see increasing chances of an even more hawkish central bank, meaning a better chance of even more interest rate hikes and other measures that would reverse the easiest monetary policy in U.S. history.

That sentiment is spreading, and is causing investors to reprice a stock market that had been hitting new historic highs on a consistent basis but has taken a steep turn in the other direction in 2022.

«The S&P is down 10%. That's not enough for the Fed to go with a weak backbone. They have to show some credibility on inflation here,» said Peter Boockvar, chief investment officer at the Bleakley Group. «By kowtowing to the market so quickly without doing anything with respect to inflation would be a bad look for them.»

Over the past two months the Fed has taken a sharp pivot on inflation, which is running at a nearly 40-year high.

Central bank officials spent most of 2021 calling the rapid price increases «transitory» and pledging to keep short-term borrowing rates anchored near zero until they saw full employment. But with inflation more durable and intense than Fed forecasts, policymakers have indicated they will start hiking interest rates in March and tightening policy elsewhere.

Where the market had been able to count on the Fed to step in with policy easing during previous