Although the Federal Reserve hiked interest rates this week for the second time in 2017, markets are not convinced there’ll be another increase before the end of the year.

The Fed raised rates by a quarter point, from 1 per cent to a target range of between 1.0 and 1.25 per cent, on Wednesday, and indicated its intention of at least one more rise during 2017.

However, the markets are pricing in a mere 17.3 per cent chance of another increase in September, and just a 31.6 per cent chance of a hike in December.

Indeed the markets are essentially ignoring the Fed. They are focusing solely on recent weak economic data, whilst believing that the Fed will eventually sit up and take notice of this information.

Whilst Fed Chair, Janet Yellen stated that the credibility of the central bank “has not been impaired”, year-on-year inflation [Insert: has fallen] to 1.7 per cent. This spooked the markets and generated further doubts as to whether the Federal Reserve can, in fact, raise rates as it predicts.

However, Mrs Yellen went on to say: “We continue to feel that with a strong labour market and a labour market that’s continuing to strengthen, the conditions are in place for inflation to move up.”

Indeed, the latest quarterly economic forecasts showed only short-term concern in regard to inflation, and expressed ongoing confidence in the growth of the economy over the next few years, with stronger consumer and business spending.

But consumption is not picking up, leading some analysts to suspect the Fed of over optimism.

Janet Yellen said in a press conference after the Fed’s statement: "What I can tell you is that we anticipate reducing reserve balances and our overall balance sheet to levels appreciably below those seen in recent years but larger than before the financial crisis.”

Mrs Yellen went on to say that this would come into effect “relatively soon.” In so much as this will put pressure on bond prices, with yields likely to rise, it would represent an additional tightening of monetary policy.

Strikingly, Fed policymakers appear to be factoring in to their forecasts increased demand growth resulting from Trump's tax and spending policies, and ensuring there is scope to cut interest rates should a spending boom turn sour.

But a Trump reflation boom appears less likely by the day, given his squabbles with Congress. So Is the Fed turning a blind eye to the realities of the Trump presidency?

The last word goes to Yellen. Whose optimism isn’t shared by the market: “Our decision reflects the progress the economy has made and is expected to make.”

Nigel Green is founder and CEO of deVere Group. One of the world’s largest independent financial advisory organizations, de Vere does business in 100 countries and has more than $12 billion under advisement.