Indeed, in those circumstances, the Federal Reserve would have to weigh carefully the effects on long rates of both the current and lagged levels of short rates so as to avoid the potential for an overshooting of short-term interest rates that would have adverse consequences for the economy.
However, if long-term rates move swiftly in response to correctly anticipated policy, the required rise in short-term rates will be smaller and there will be less risk of overshooting. Thus, for the same reasons the Federal Reserve attempts to be pre-emptive in its monetary policy decisions, we would welcome pre-emptive pricing by market participants.