On Wednesday, the Federal Reserve announced that it will keep interest rates exactly where they are. The central bank "does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably towards 2%," causing many notions of interest rate cuts starting in March to dwindle.

Oppenheimer Asset Management Chief Investment Strategist John Stoltzfus and T. Rowe Price Chief US Economist Blerina Uru?i join Yahoo Finance to discuss the Fed's January policy decision and its broader implications for markets moving forward.

"The market never trusts the Fed," Stoltzfus affirms. "The Fed thus far has not pushed the economy into a recession even as it has raised rates for almost two years. It was only aggressive when it raised four times 75 bips [basis points] at a time. And then it's been on long pauses with the exception of 150 and 125 bips hike somewhere along the way in there. The point is, this Fed wants to have its cake and eat it, too."

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Editor's note: This article was written by Nicholas Jacobino

Video Transcript

- And so, John, I bring you back in here. As Blerina said, the Fed data dependent between now and March, we got unemployment-- we got employment reports, we got inflation reports, plenty of data still for the Fed to make sense of here, and we're all trying to place our bets, John, on what the trajectory of rate cuts looks like. I'm wondering what you think, John. Is it when you think the cuts come first half, second half, and does it matter to you, John, as an investor, as a market strategist on the timing of that?

JOHN STOLTZFUS: Well, when it comes to this-- the timing of this, we look at it. We think the Fed has been very clear. Jerome Powell and his Fed do not want to be remembered like Arthur Burns is remembered as failing to act against inflation, and letting inflation run for about seven or eight years before Paul Volcker had to take draconian measures to take it back. They want to be more in the Ben Bernanke legacy. And as a result of that, they have been extremely, we think, sensitive. I've been in this business since 83. So I came in the second term of Paul Volcker.

So I remember, when rates were a lot higher than they are today, and inflation was running a lot hotter. They don't want to go back to there. And I think the market never trusts the Fed. And especially, when you look at the trading floors and the trading rooms, what they trade on is very different than what intermediate to long term money managers like myself are going to be looking at. What we look at is we don't think the Fed thus far has not pushed the economy into a recession.

Even as it has raised rates for almost two years, it was only aggressive when it raised four times 75 bips at a time. So-- and then, it's been on long pauses, with the exception think of 150 and 125 bips hike somewhere along the way in there. But the point is, this Fed wants to have its cake and eat it too. And so far, almost two years into the Fed funds hike cycle, it has. And I think when Jerome Powell speaks today with the press, the message will probably remain the same essentially.

There may be a few tweaks in words, but it does remain data dependent. And that's a good thing, we believe, for the market. We're in an environment where bond buyers now get something in return in the form of a coupon. And bond issuers have to pay for the privilege of borrowing money. Great for intermediate to longer term investors, for short term investors, especially those who depend on extreme margin or leverage. It's a tough environment, and they'll protest very hard.

- And John, expand on what this means for the equity market as well. Particularly, I'm looking here at a day when we're seeing the NASDAQ, which has been leading stocks of course, higher because of the Magnificent Seven is falling. Because two of the Seven and one of the-- I don't know, Seven plus AMD I guess you could call it-- is dragging things down. So what does that imply about the importance of the Fed or not importance of the Fed as we go forward?

JOHN STOLTZFUS: I think, you know, in this case, it's tech has had a phenomenal run. A lot of things were priced in. The responses here in technology results have been somewhat harsh on disappointment, and rather, unrewarding on positive surprises overall. And yet, the results are not so bad. And we can't-- on a quarter to quarter basis, you're bound to have some disappointments. It's quite natural. It's part of the nature of business.

But for traders, the bet is always on quarter to quarter performance or even shorter than that as a rule. And so, it creates volatility, we think, for intermediate to long term investors, and opportunity on pullbacks to look for the babies that get thrown out with the bathwater-- the good stocks that are suddenly priced more attractively because they get sold off in any kind of a haircut. That doesn't have to be a correction. But just in haircuts, sometimes, specific stocks get hit particularly too hard. And for traders, it's an opportunity to trade. They can play the game.