The Federal Reserve's plans for a prolonged period of elevated interest rates could continue pressuring stocks and bonds in coming months.
However, some investors doubt the central bank will stick to its guns.
The US Fed left interest rates unchanged last night, in line with market expectations.
Policymakers bolstered their hawkish stance with a further rate increase projected by the end of the year and monetary policy forecasts kept significantly tighter through 2024 than previously expected.
Broadly speaking, higher rates for longer could be an unwelcome turn of events for stocks and bonds.
"What was delivered yesterday was a hawkish pause," Paul Sommerville of Sommerville Advisory Markets told Morning Ireland.
"They might cut rates towards the end of 2024, if all goes to plan, but the markets were expecting more aggressive rate cuts from both the ECB and the Fed by now," he explained.
He said while the US was somewhat justified in its stance, given the relative strength of the US economy, the picture was very different in Europe.
"The ECB has been cutting expectations for GDP growth, but putting up rates. They're in a much trickier situation."
We need your consent to load this rte-player contentWe use rte-player to manage extra content that can set cookies on your device and collect data about your activity. Please review their details and accept them to load the content.Manage Preferences
Paul Sommerville predicted that the ECB would be cutting interest rates aggressively by the end of next year.
"Central Banks made a mistake by not putting up rates previously and now they're making a mistake by putting them up too aggressively," he said.
Predictions for a soft landing for economies amid higher interest rates are being challenged by a series of so-called 'near term risks'.
Energy prices are on the rise again with Brent crude heading back towards $95 a barrel in recent days.
Gas prices, having spiked in the last few weeks in response to strikes at LNG terminals in Australia, have started to ease back on signs of easing supply risks.
"If they keep monetary policy as restrictive as it is.... the chances of a harder landing become higher," David Norris, Head of US credit at TwentyFour Asset Management told Reuters.
Additonal reporting by Brian Finn
