Hawkish Markets Test Warsh's Fed Balance

Kevin Warsh's delicate balance between pleasing the White House and reassuring markets of Fed independence is under threat. With bond yields soaring and rate expectations turning hawkish, the Federal Open Market Committee (FOMC) faces renewed credibility questions.

The data points to another base interest rate hike at the next FOMC meeting in October, with market expectations sitting at over 75% according to CME's FedWatch barometer. This would irk President Trump, who has been lobbying for lower rates since before his return to office.

The 10-year Treasury yields have surpassed 5.1%, while the 30-year Treasury is above 5.4%. Deutsche Bank's Jim Reid noted that this marks the biggest daily jump in the market since April 2025, and the 10-year yield has reached a post-2007 high.