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Traders work on the floor of the New York Stock Exchange on Oct. 7.Spencer Platt/Getty Images

Stock markets have a habit of obsessing over a single question and right now the question du jour is when the Federal Reserve, the world’s most powerful central bank, will start pivoting away from its take-no-prisoners attitude toward raising interest rates.

The short answer: not nearly as soon as investors would like.

Any hint of a Fed pivot would be excellent news for stocks, which have been smacked hard in recent months by the central bank’s relentless drive toward higher interest rates. It would also be good news for the world’s other central banks, which have mostly been forced to defend their currencies by keeping up with the Fed’s aggressive rate hikes.

For now, though, policy makers remain adamant no pivot is in sight. Fed chair Jerome Powell declared early this spring he will need “clear and convincing” signs inflation is abating before letting up on interest rates.

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Several presidents of regional Federal Reserve banks banged home that message this week. “I do see more rate increases as necessary,” Mary Daly, president of the Federal Reserve Bank of San Francisco, said on Wednesday. A day later, Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, warned the Fed has “more work to do” on bringing down inflation and is “quite a ways away” from being able to pause its rate hikes.

The message was much the same on this side of the border. Bank of Canada Governor Tiff Macklem told the Halifax Chamber of Commerce in a speech on Thursday “there is more to be done” before the inflation fight is over.

By the normally murky standards of central bankers, this qualifies as stunningly clear communication. But why are policy makers so determined to stay the course?

Much of it has to do with the experience of the 1970s. While that decade is often remembered for its consistently high inflation, the historical picture is more nuanced. Inflation didn’t just soar – it rose, then plunged, then rose again. The Fed and the Bank of Canada both cut their policy rates in 1976 when inflation seemed to be on the decline, only to be forced to raise rates to stratospheric levels when inflation roared back even stronger in the latter half of the decade.

The 1970s left central bankers with one overwhelming takeaway: Don’t let up on the fight against inflation until the battle is definitely won.

Investors, though, don’t like the notion of rising interest rates grinding stock prices relentlessly lower for a long time to come. They have been eager for anything that might indicate the fight against inflation has reached a turning point, that a Fed pivot is imminent and that a stock market revival is just around the corner.

Share prices bounced higher on Monday and Tuesday on hopes such a pivot is in sight. One piece of evidence was very early, very tentative indications the U.S. jobs market is cooling.

The evidence came from the most recent Job Openings and Labor Turnover Survey (JOLTS) from the U.S. government. It showed the ratio of job openings to unemployed workers has dipped dramatically. The decline suggests employers are no longer hiring with the same gusto – presumably a good thing from the Fed’s perspective, since it would indicate demands for higher wages may ratchet down in coming months, easing inflation.

But the market’s sunny optimism on Monday and Tuesday didn’t endure long. First came the declarations from the likes of Ms. Daly and Mr. Kashkari they weren’t for turning course on interest rates any time soon. Then came a U.S. jobs report on Friday that showed the labour market is cooling, but remains uncomfortably hot.

The Fed now seems on course for another supersized rake hike at its next meeting in early November. This is not good news for stocks. Capital Economics wrote in a note Friday it is slashing its outlook for the S&P 500 index. The forecaster no longer expects the U.S. benchmark to bottom out at around 3,600 by year-end. Instead, it sees it falling further, to around 3,200 by the middle of next year.

Canadian investors shouldn’t expect a much easier ride. Our national job market is “super-tight” and inflationary pressure remains high, according to a note from Derek Holt, head of capital markets economics at Bank of Nova Scotia. Mr. Macklem’s hawkish speech this week underlines the Bank of Canada’s resolve to keep interest rates high until inflation is beaten down. A recession seems increasingly likely.

What might convince central banks to finally pivot on interest rates? Signs of severe financial market distress might do it. So could political backlash from falling home prices and rising unemployment. But the most likely motivation for a change of heart would be the “clear and convincing” evidence of falling inflation Mr. Powell demanded months ago.

The U.S. government publishes its next consumer price index report on Thursday. Statistics Canada releases its next CPI readings on Oct. 19. Investors have to hope the numbers show inflation is receding. If not, that pivot could be a long time coming.

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