There may be a middle ground between blindly trusting central bankers’ interest-rate guidance and disregarding it completely. On Tuesday, stocks fell, Treasury yields jumped and the U.S. dollar rose against other currencies after Federal Reserve Gov. Christopher Waller warned that any lowering of interest rates this year will need to be “carefully calibrated and not rushed.” Though he is a well-known hawk, many other officials have also recently suggested that investors may be expecting borrowing costs to come down too far and too fast. European Central Bank rate setters made the same point at the World Economic Forum in Davos this week, including chief economist Philip Lane. To be sure, Waller’s comments still suggest that monetary policy stands a good chance of being loosened this year. But markets have priced in a lot of stimulus over the past few months, and failed to heed calls for caution.
Source: WSJ.com: Markets
