Fed Chairman Kevin Warsh leaves interest rates unchanged as bond investors push 30-year Treasury yields to 2007 highs
Fed Chairman Kevin Warsh kept the federal funds rate unchanged on Wednesday, even as bond investors pushed the 30-year Treasury yield to 5.27%, its highest level since 2007. Warsh noted that while the Fed has held the overnight rate target at 3.5% to 3.75% throughout 2026, the markets have independently tightened financial conditions during the intermeeting period. By allowing markets to drive longer-term yields, Warsh is adopting a strategy similar to former Fed Chair Alan Greenspan, favoring less public hand-holding and more room for investor influence. This approach provides the administration's central bank with comfort regarding inflation targets, but it places the burden of tightening on bond vigilantes. While this strategy allows the Fed to be less active, it requires households and businesses to absorb higher borrowing costs, particularly in the housing market, where the impact of high rates is already being felt.