The Game between the Fed and the market

When the Fed announces a rise in the interest rates, the market generally responds negatively. The decision of increasing the interest rate made by the Fed aims to cool down the overheating market; however, the Fed does not want the market to overreact to its decision. However, the market may have incentives to overreact the Fed's decision, as the rise in the interest rate is unwelcome and overreaction may force the Fed to reconsider its decision. Therefore, the Fed may leave some room for the market to overreact when sending its message. However, this could affect the Fed's credibility. To gain a full credibility, the Fed has to send its accurate message and refuse to reconsider its choice when the market is overreacting. This generates another problem that the overreaction of the market should be overheated with exogenous information, leading to an actual collapse in the market. Therefore, I think the contractionary policies of any central bank are highly risky, especially when the market is less risk averse (the safe net built by the governments could affect the financial institutions' risk behaviour), as they are very likely to have the following two results: the market overreaction overheated by exogenous factors leads to an actual collapse of the market as well as the economy, or the Fed reconsiders its decision and the market is happy until the bubble eventually bursts inevitably.