Warsh's Credibility Questioned as Bond Market Punks the Fed

The Federal Reserve's decision to hold the federal funds rate steady in the 3.5%-3.75% range has been met with skepticism from the bond market, which has interpreted the move as a lack of clarity on interest rates.

At Kevin Warsh's second meeting as Fed Chair on July 29, the committee voted 9-3 to maintain the current rate, but three regional Fed presidents - Beth Hammack, Neel Kashkari, and Lorie Logan - dissented in favor of a quarter-point hike. They cited inflation running above the Fed's 2% target for more than five years.

The bond market's reaction was immediate, with the 30-year Treasury yield jumping as much as 14 basis points to nearly 5.23%, its highest level since 2007.