Markets Challenge Warsh’s Approach to Taming Inflation

Early in Kevin M. Warsh’s second news conference as chairman of the Federal Reserve, he laid out how the central bank would ultimately be assessed as it takes on one its most challenging inflation problems in decades.

The central bank was in the business of “performance,” he told reporters on Wednesday, after the Fed’s decision to hold rates steady at a range of 3.5 to 3.75 percent. “We are going to be judged by how we perform.”

Financial markets swiftly rejected Mr. Warsh’s approach, which involved tough talk on inflation but stopped well short of embracing the prospects of higher interest rates to quell price pressures. The response, primarily from the $28 trillion U.S. government bond market, was unequivocal. Markets expected more from a policymaker who has made taming inflation a top priority of his chairmanship.

Long-term government borrowing costs shot higher as Mr. Warsh spoke, with the 30-year bond notching its largest one-day increase in more than a year. Trading around 5.22 percent, it is at the highest level since 2007. The 10-year Treasury yield, which serves as the benchmark for borrowing costs around the world, also rose alongside expectations about inflation over a longer time horizon. Stock markets sold off, too, even as investors pushed back the timing of potential rate increases until later this year.

Article source: https://www.nytimes.com/2026/07/30/business/warshs-performance-falls-flat-with-markets-as-fed-holds-rates-steady.html