The markets have always reckoned the Fed would hike fewer times than officials themselves thought but it's the swing more than the gap that now catches the eye. Markets priced in close to 3 hikes in 2016 (after the initial one), back in December. Now they put the odds of a single hike at only 50/50. 

After an awfully long quiet spell, the Fed officials too now appear to be backpedalling. NY Fed president Dudley noted yesterday that 'financial market conditions are considerably tighter than they were in December' and the Fed would have to take that into account come March (when the FOMC next meets). 

Ten-year Treasury yields are 30 basis lower today than in December (1.88% vs 2.25%). Fifteen-year mortgage rates have fallen by 20 basis points. The euro and yen are smack where they were in December (and in fact are stronger than in December following yesterday's weak service sector ISM report). The S&P 500 is down by 7-odd percent since mid-December. 

Back in November, the Fed let it be known that within some awfully wide bounds, it didn't care what the data were doing, it was going to hike rates in December and, unless things changed appreciably, it was going to deliver 4 more hikes in 2016. The data have weakened some since then but not by very much and inflation has risen. Interest rates, including mortgage rates, are lower and the dollar is unchanged. Only the stock market is 'tighter'. If this is what the Fed has to consider come March, it's time to get the old Texan Roger Fisher back into the FOMC saddle. He retired last March, of course, and with him, apparently, went his motto: markets should never be coddled. 

"We didn't like his hawkishness on policy but on this latter point he was spot-on. Markets can run with the flavor of the month. It's what they do. It's not what the Fed should do", says DBS Group Research.