Market Extra: Are investors too comfortable with the idea of a Fed ‘policy mistake’?

Are investors too comfortable with expectations the Federal Reserve won’t follow through on its tightening plans?

While Fed Chairwoman Janet Yellen emphasized last week that it’s full steam ahead on rate increases and balance sheet reduction, cries of a potential “policy mistake” have been heard from economists and investors who contend the central bank is penciling in an overly aggressive tightening path in the face of softer economic data, particularly on the inflation front.

Those doubts are reflected in the Treasury market, where the yield curve—a graph mapping yields across maturities—has flattened in recent weeks as longer term yields fell. Yields move in the opposite direction of bond prices.

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