Warsh’s stripped-back Fed communication ‘already backfiring’, say investors

Investors say the Fed’s stripped-back communication strategy under Kevin Warsh is already hurting market stability and weakening the central bank’s influence over Treasuries. After the Fed held rates steady, Warsh offered little forward guidance and emphasized a tougher stance on inflation, prompting a sharp steepening in the US Treasury curve. The 30-year yield climbed to 5.24%, the highest since 2007, while the two-year yield fell to 4.27% as traders reduced bets on near-term rate hikes. The article argues that reduced guidance has increased volatility, lifted long-term borrowing costs, and added pressure on public finances, companies, and mortgage rates. Some banks still expect no rate cuts this year, but markets are now pricing in two hikes by next June.