Economists believe the Federal Reserve will raise interest rates at least once this year, but market participants are betting policymakers will stand pat once again after seeing them threaten to take away the punch bowl only to let the good times roll.
The market is nearly evenly split on the prospect of a rate hike by the end of this year, according to the CME's FedWatch Tool. Nearly 54 percent of the market believes interest rates will remain in the current range of 25 to 50 basis points in December. Meanwhile, the odds of a September hike fell to 12 percent in the market's view.
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On Sunday, Fed Vice Chairman Stanley Fischer said the Fed was close to meeting its inflation and labor market targets. That followed statements from Fed officials last week that indicated the central bank had not ruled out a September rate hike, as well as the release of minutes from the Federal Open Market Committee's July meeting that showed policymakers were split over a near-term increase.
"The market's pricing in well below what any economist or strategist is pricing in," UBS Deputy Chief U.S. Economist Drew Matus told CNBC's "Squawk Box" on Monday.
Those experts generally agree the market is not listening to recent statements from Fed officials, he said. But the market is not putting stock in those pronouncements because they've been burned in the past, he added.
Last year, the Fed indicated it planned to raise interest rates four times in 2016, but policymakers have yet to pull the trigger due to intermittent concerns about eruptions in overseas markets, slowing midyear labor gains and the British vote to leave the European Union.
Casey Clark, vice president of investment strategy research at Glenmede Trust, said he is siding with economists on the Fed rate-hike debate.
"If you look at economists, they think there's a 75 percent chance of a rate hike in December, and then you look at the market, and they're saying there's about a 50-50 chance," he told CNBC's "Worldwide Exchange" on Monday.
In Matus' view, the Fed's intransigence will ultimately result in inflation increasing to a level beyond which central bankers are comfortable, forcing them to raise rates and cool off the economy to prevent prices from ratcheting up too high. The Fed's current inflation target is 2 percent.
If that happens, the question for investors will be whether corporate earnings have recovered enough to put a floor under stock prices, said Joseph Zidle, portfolio strategist at Richard Bernstein Advisors.
Stock markets have risen in large part because U.S. bonds are yielding little return. In the event that rates rise faster than expected, Zidle acknowledged markets could see a repeat of this past winter, when an initial quarter-point rate hike in December and forecasts for subsequent increases throughout the year piled pressure on stocks.
Corporate earnings can end a four-quarter recession and return to growth next year if the dollar does not strengthen once again and crude oil prices do not fall anew, he added.
"If we do have that strong dollar and if oil doesn't hold this $50 level, then yeah, I think you'd be … ratcheting down your earnings expectations," he told "Squawk Box."