Warsh Warns: US Interest Rates May Rise If Inflation Persists

US Federal Reserve Chair Kevin Warsh hinted that interest rates may need to rise if inflation remains above target. He emphasized the central bank's commitment to its 2% inflation objective and suggested that policymakers would act if underlying inflation doesn't improve enough.

The comments sparked a hawkish market reaction, with the yield on the two-year US Treasury note jumping 11 basis points to 4.34%, its highest level in a month. The 10-year Treasury yield rose 5 basis points to 4.72%, while the 30-year yield gained 1.6 basis points to 5.206%.

Financial markets now price in a roughly 60% probability of a Federal Reserve rate increase at the September meeting, up from about 35% before Warsh's speech.