Updated · The Australian Financial Review · Aug 21
Warsh Lifts US Long-Term Rates as Core Inflation Accelerates to 3.8%
Updated
Updated · The Australian Financial Review · Aug 21
Warsh Lifts US Long-Term Rates as Core Inflation Accelerates to 3.8%
3 articles · Updated · The Australian Financial Review · Aug 21
Summary
Long-term US interest rates rose after Fed Chair Kevin Warsh signaled a tighter stance through sparse, carefully calibrated communications, even without an actual rate increase.
Core inflation helped drive that move, accelerating from 3.3% over 12 months to a 3.8% six-month annualized pace and reinforcing concerns that price pressures are re-emerging.
Trump had reportedly persuaded Warsh not to raise short-term rates, potentially until after the midterm elections, leaving markets to push borrowing costs higher at the long end instead.
The shift creates a policy problem for Trump and Treasury Secretary Scott Bessent because higher long-term yields can tighten financial conditions even when the Fed holds its benchmark rate steady.
Why are long-term borrowing costs skyrocketing for everyday Americans even when the central bank officially hits pause on interest rate hikes?
With national debt topping $40 trillion, has the bond market secretly taken over the Federal Reserve's job of controlling inflation?
Can defensive dividend stocks truly protect your portfolio when sticky inflation and massive government deficits threaten to keep yields dangerously high?