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Whether or not you like their monetary policy, do not ignore the Federal Reserve’s warnings. As the central bank of the US, it is an independent body that will do whatever is necessary to keep the financial system afloat.With that said, they do have a trust issue. For many years it was difficult to trust the Federal Reserve’s Open Market Committee (FOMC), the voting body for monetary policy. The FOMC seemed to have trouble handling the stock market when it started to wobble. For whatever reason, their go-to solution was to dump liquidity into the markets. This is deception at best, but the stock market and investors responded positively.When the FOMC saw the potential for a catastrophic disruption of the markets and economy in March 2020, they turned to this same playbook. Who knew how long the COVID-19 pandemic and shutdown would last? Most investors pulled money from the markets and decided to wait at the sidelines. The longer they shunned investment opportunities, the more difficult it would be to recover. Hence, the FOMC decided to flood the market with liquidity. The Federal government also issued stimulus checks.They did the same thing back in 2008-09 when the Great Financial Crisis threatened to take down the entire financial world thanks to irresponsible mortgage loans. Once again, the Fed served as a safety net to create a cushion, and a disastrous outcome was avoided.At the time, we needed that liquidity. But now we are dealing with the consequences of such policies, namely high inflation. Too much money chasing too few goods is simply trouble for any economy, and it’s very bad monetary policy.So now the FOMC has raised interest rates at rapid clip over the past 18 months, and they are still concerned about high inflation. Do not ignore the Federal Reserve’s warnings, or you will run the risk of losing money in a market of shrinking liquidity.The Fed is leaning on this restrictive monetary policy to help lower inflation. It will eventually work – but if you fight their hawkish policy, you will lose. Right now it is more important than ever to and pay attention to the Fed’s statements. Do not extrapolate from the words the policies you would like to have. The Fed has a job to do, and will do it whether you’re on board with it or not.More By This Author:Market Blast – Monday, Oct. 23 Daily Bites For Thursday, Oct. 19Enphase Energy Inc Chart Analysis