Warsh's Tough Talk Faces Reality Check Amid Inflation Concerns

The Federal Reserve is facing pressure to raise interest rates despite the recent uptick in inflation. Fed Chair Kevin Warsh has emphasized that the central bank will get inflation back to its target of 2%, but has not specified how.

Warsh's tough talk has already lifted borrowing costs, with the yield on the 10-year Treasury note briefly topping 4.7% last Thursday, the highest in about 18 months. However, current and former Fed officials say that markets are demanding action, and that Warsh's rhetoric will only take him so far.

Stern warnings from other Fed officials suggest that rate hikes may be necessary to combat inflation. Lorie Logan, president of the Federal Reserve Bank of Dallas, stated that 'modestly higher interest rates would better balance the outlook,' while Christopher Waller said that if core inflation keeps climbing, the Fed's rate-setting committee 'will need to consider' hiking rates 'in the near term.'