The market thinks rates will come down a lot. It could be let down

Markets seem to have taken this week’s positive economic data as the all-clear signal for the Federal Reserve to start cutting interest rates aggressively next year.

Indications that both consumer and wholesale inflation rates have eased considerably from their mid-2022 peaks sent traders into a frenzy, with the most recent indications on the CME Group’s FedWatch gauge pointing to a full percentage point of cuts by the end of 2024.

That may be at least a tad optimistic, particularly considering the cautious approach central bank officials…