Warsh's Inflation Pledge Falls Flat with Bond Markets

The Federal Reserve held its benchmark interest rate steady this week, but bond markets showed skepticism about new Fed Chair Kevin Warsh's inflation plans. In a statement, Warsh reaffirmed the central bank's long-held target of 2% inflation and vowed not to tolerate anything more.

However, bond market reaction was lukewarm at best: the yield on 30-year Treasury bonds hit its highest level in nearly 20 years, suggesting traders don't believe Warsh is ready or willing to raise rates to combat inflation.

Warsh emphasized his goal of reducing forward guidance from the Fed and letting markets act independently. He wants policymakers to get a 'direct and unfiltered' view of the US economy without interference from central bank announcements.