The Fed may keep one foot on the brake and one on the gas

Financial strains mean a more dovish Fed, all things considered. Reduced liquidity and slowed growth in the wake of the banking stresses will do some of the work in cooling inflation that otherwise would be done by rate hikes. But that doesn’t mean that the Fed will necessarily begin lowering or even stop raising rates from here. It may keep one foot on the brake pedal (through rate hikes) even as it taps the accelerator by providing liquidity (or bailouts, if you want to use a dirty word) to the banking system.