Fed spoils the party for overly optimistic investors

A Federal Reserve Board member says US inflation is on a path that should enable the central bank to cut interest rates three times this year. Despite his apparent optimism, the US sharemarket fell and bond yields spiked in response to his comments. Christopher Waller is one of the 12 voting members of the Fed and so his views have weight, as the markets’ reactions demonstrated. But why did the apparently “dovish” remarks from a former monetary policy hawk (Waller was a strong advocated for the aggressive, five percentage points-plus rate hikes that the Fed has made since March 2022) evoke such a sour response? The rate cut party…