US Borrowing Costs Hit 19-Year High as Fed Keeps Rates Steady

US borrowing costs have hit their highest level since 2007 after the Federal Reserve decided to keep interest rates steady. The yield on the 30-year US Treasury bond rose 14 basis points to nearly 5.24%, a 19-year high.

The Fed's decision sparked fears that it may not move quickly enough to combat rising inflation, which has reached an annual rate of 3.5% in June after a brief ceasefire between Washington and Tehran was agreed upon. However, the ceasefire has since ended, with both sides exchanging fire and sending oil prices climbing higher.

Kevin Warsh, the Fed chair, insisted that the bank would 'not waver' in its commitment to tackling rising prices and emphasized that there is no implicit target above the 2% inflation rate. He added, 'There's only a target and it's 2%. This Fed will not waver … Our credibility rests on performing our duties and delivering on our responsibilities.'

Felix Schmidt, a senior economist at Berenberg, questioned Warsh's explanation for not hiking interest rates, implying that the Fed may be relying on higher capital market interest rates to fight inflation in the short term.