When the Federal Reserve raised rates on Wednesday, it intimated that one more rate hike is in the cards for 2017.

Not so fast, say market strategists interviewed by Financial Advisor.

The three strategists agreed that they see nothing in the economic data that would warrant another increase this year.

Roger Aliaga-Diaz, Vanguard’s chief economist for the Americas, wrote on Wednesday that he did not expect additional rate hikes in 2017, as inflation will not “rise meaningfully from current levels.”

For similar reasons, Paul Eitelman, multi-asset investment strategist at Russell Investments, also believes that the Fed is finished increasing interest rates this year.

“The Fed feels like they’ve achieved their full employment objective. They want to continue to tighten, but we’re not seeing strong enough economic fundamentals for them to continue at this pace,” says Eitelman. “They’re effectively done for 2017. Growth has been disappointing, inflation has been disappointing relative to forecasts, and if we remain stuck in mediocre growth, that should slow down the pace of rate hikes a little bit.”

Another Fed increase this year would place the funds rate at 1.4 percent. Eitelman believes that the Fed might be indicating that it’s willing to continue normalizing interest rates in a mediocre economy.

At San Francisco-based Charles Schwab Investment Management, Brett Wander, chief investment officer for fixed income, also argues that the Fed is probably done raising rates for this year.

“My crystal ball is broken. An additional rate hike is always possible, but it’s not anywhere near as likely as it might have been at the beginning of the year or a year ago,” Wander says. “If you look at market expectations, the market is pricing in only one additional rate hike in over the next 12 months.”

In addition to low inflation and slow growth, Wander says that despite low interest rates, the Fed is near “normal” based on the current market context.

Unlike previous rate hikes, the Fed’s decision follows a host of economic signals that, at best, sent mixed signals about the course of the economy, says Rob Waas, CEO and CIO of RSW Investments, a Summit, N.J., fixed income manager with more than $2 billion AUM.

“The Fed has to find pockets of strength to point to when they increase rates, but the ledger is stacking up against them pretty decidedly: Personal income is weak, spending is weak, debt burdens are extraordinarily high, and the aging of our society and the decline in birth rates that we have seen is acting as a very strong headwind for growth,” Waas says.

Yet unemployment continues to decline, falling to 4.3 percent in May. In response, the Fed on Wednesday lowered it’s long-term unemployment expectations by a tenth of a percentage point to 4.5 percent. In her comments following the announcement, Federal Reserve Chairwoman Janet Yellen noted that workforce participation rates were holding steady, signaling real improvement in the economy.

In the context of strong unemployment numbers, the Fed's action seems appropriate, wrote Vanguard’s Aliaga-Diaz.

“While the market seems to interpret rate hikes as too hawkish from an inflation perspective, one could make the case they are too dovish given low unemployment rates,” wrote Aliaga-Diaz. “Given these diverging forces, we support the Fed’s decision to take a middle path and modestly raise rates at this time.”

Yellen also sounded confident that economic growth would resume. While the Fed doesn’t expect the U.S. to reach the 3 percent GDP growth called for by President Donald Trump, it increased its 2017 growth projection one-tenth of a percentage point to 2.2 percent.

As such, the Fed did not revise its expectations for rate increases moving forward.

“It’s important to look beyond whether they’re raising or lowering rates, they’re trying to adjust rates to match the current conditions and potential future conditions of the economy,” says Wander. “In the midst of the current environment, where we’re seeing mixed signs of growth, a rate between 1 and 1.5 percent probably makes sense.”

Inflation, a concern at the beginning of the year as proposed fiscal policies offered some potential of stimulating the economy, has subsided in recent months. Many members of the Fed have stepped back from expectations that core inflation will hit 2 percent this year, projecting a 1.6 percent headline rate for personal consumption expenditures. In her comments, Yellen argued that inflation could return to 2 percent by the end of 2018.

The relatively flat numbers, and the Fed’s dovish forward outlook, calls into question the decision to raise rates, some say.

Waas expects that the Fed will continue to raise rates until a recession begins.

“Looking back at the last 18 recessions going back to 1915, the Fed is going to tighten until they break something,” says Waas. “This Fed is tightening in an environment where, on any other occasion, they would be loosening.”

The Fed may be preparing for the next recession, raising rates now so that it can create more monetary stimulus when the economy begins to shrink.

“They’re doing this for reasons that are non-economic,” says Waas. “They want to put some arrows in their quiver to cut rates when we do finally experience another recession.”

In the short term, the increase is likely to have little impact—most market participants had anticipated Wednesday’s vote despite the mixed numbers. Spot polls from SIFMA and CNBC ahead of the announcement showed the majority of industry professionals predicting an increase and the market had priced in a more than 95 percent probability of a hike.

Fixed-income markets, which have been more sensitive to recent economic data, may shrug off the rate increase, says Eitelman.

A small rate increase is unlikely to threaten credit, Eitelman says, as most holders of long-term debt should be unaffected, and most debtors overall are able to weather incremental rate hikes.

In Tuesday comments, DoubleLine founder Jeff Gundlach opined that high yield bonds were still probably safe, but that investors should be wary of monetary policy’s impacts.

“With high-yield bonds, it’s OK to dance, but make sure you dance near the door,” Gundlach said.

The Fed’s decision comes amidst low levels of volatility across most asset classes, said Gundlach, arguing that further rate increases this year could but pressure on equity markets.

Recession remains unlikely, said Gundlach.

“I don’t see a single indicator for recession except corporate debt to GDP, and that’s not a leading indicator,” Gundlach said. “When you live through a low volatility period, you should be concerned. The days of low volatility are probably numbered.”

The Fed also announced on Wednesday that, starting this year, it would gradually try to unwind the $4.5 trillion balance sheet it has accumulated since the financial crisis.

The balance sheet reduction will entail gradually ending or reducing reinvestments as the securities on the Fed’s balance sheet mature in a predictable manner, says Wander. “As long as the Fed continues to paint a picture of reasonable growth and inflation expectations, as long as there are no surprises for the market in these announcements, I don’t think we’ll see a selloff.”

Political uncertainty, especially in the U.S., is exacerbating investor uncertainty. Policy proposals from President Trump that would roll back regulations, lower taxes on businesses and individuals and spend up to $1 trillion over the next decade on infrastructure may be longer in coming than once expected.

“Fixed income markets are conveying two messages about Trump,” says Wander. “One is that it’s unlikely that he will be able to accomplish the things that had initially been intimated on the campaign trail and after his inauguration to the extent that people once believed, and he won’t be able to accomplish them any time soon. Even if progress is made on these issues, it’s unlikely to have a significant impact on inflation expectations.”