Investors were in good cheer last week after the smallest rate hike in a year was followed by relatively soothing words from Federal Reserve chief Jerome Powell. It’s not that Powell was dovish. Indeed, he suggested he would prefer to be too hawkish than too dovish. If inflation “springs back”, it would be “very difficult to manage”, he said.

In contrast, while he had “no desire to overtighten”, the Fed had “tools” that could be employed if inflation starts coming down faster than expected. Nevertheless, Powell’s tone was less hawkish and less scolding than in recent months.

For some time, Powell has been involved in a standoff with markets, insisting rate hikes will stay higher for longer. Market prices have suggested otherwise. Powell could have pushed back harder against market expectations last week, but he opted not to do so. As BMO Wealth Management put it, the Fed “is struggling to maintain a semblance of hawkishness, but at this point is probably just along for the ride”.