Hmm…without knowing your entire setup its hard.
I would do a fresh minimal character blueprint like the one I have, and you too, with just that snippet and component hierarchy and nothing else.
And also maybe fresh character+camera controllers too just to be safe. And see if you get the same result. And then go from there?
I just also added the same rotation setup you are using there and that works ok in my minimal scene, the ball sits a meter in front of my nose even as I turn my head around.