There’s “no reason” the Fed should cut rates “as quickly or as rapidly as in the past.”

That’s according to Chris Waller, who on Tuesday delivered remarks at a Brookings event. The title of his address was “Almost as Good as It Gets…But Will It Last?”

Markets were all ears. It was Waller, you’ll recall, whose November 28 comments on the prospects for rate cuts in 2024 tipped the Fed’s dovish pivot and helped extend the “everything rally.”

I’ve been over this ad nauseam, but it bears repeating: Waller didn’t say anything especially groundbreaking in November. He merely reiterated the idea that if inflation continues to recede, a rules-based approach to setting policy might dictate rate cuts in order to prevent the real policy rate from rising mechanically.

Although the idea was hardly new, the language Waller used made it clear the Fed was indeed predisposed to adopting that strategy in 2024, and that got the market’s attention.

Fast forward nearly two months, and market pricing suggested the Fed would cut rates half a dozen times this year, twice the number of cuts conveyed by the December dot plot. Here’s one key passage from Waller’s speech on Tuesday:

Time will tell whether inflation can be sustained on its recent path and allow us to conclude that we have achieved the FOMC’s price-stability goal. Time will tell if this can happen while the labor market still performs above expectations. The data we have received the last few months is allowing the Committee to consider cutting the policy rate in 2024. However, concerns about the sustainability of these data trends requires changes in the path of policy to be carefully calibrated and not rushed. In the end, I am feeling more confident that the economy can continue along its current trajectory.

Not exactly headline news. But, as I suggested two days ago, markets would invariably react to Waller’s remarks no matter what he said. And markets did. React, I mean. Yields rose meaningfully.

Bonds had overshot on the dovish side, so it wasn’t surprising to see a parallel 12-13bps upward shift across the curve. When the Fed cuts, Waller said, the Committee should do so “methodically and carefully.” That doesn’t sound like a March cut.

If you really wanted to — and Bloomberg did — you could dramatize Waller’s comments and the reaction in rates. “Bonds Slump as Fed’s Waller Leans Against Expected Rate Cuts,” one headline declared.

That’s technically accurate, but it was probably better to say that with rate-cut expectations having matched local extremes late last week (in the wake of a cool read on PPI), the balance of risks for rates around Waller’s scheduled remarks this week was asymmetric.

Waller reiterated that in his view, policy settings are now appropriately restrictive and “should continue to put downward pressure on demand” such that inflation continues to moderate.

“As long as inflation doesn’t rebound and stay elevated, I believe the FOMC will be able to lower the target range for the federal funds rate this year,” he went on, before noting that because the economy is resilient, there’s no urgency. “The healthy state of the economy provides the flexibility to lower the (nominal) policy rate to keep the real policy rate at an appropriate level of tightness,” he said.

Two other notables: Waller flagged upcoming revisions to the CPI data (next month) as potentially pivotal, and during a Q&A at the same event, he suggested the terminal rate for bank reserves is between 10% and 11% of GDP (so, ~$2.75 trillion to $3 trillion).