Kevin Warsh has been running the Federal Reserve for about 100 days, and the bond market has already made up its mind: it doesn’t believe him.
Following the Fed’s late July 2026 policy meeting, where rates were held steady, 30-year Treasury yields surged 14 basis points to nearly 5.23%. Meanwhile, short-term bond yields actually fell, steepening the yield curve.
The credibility gap
Warsh took the helm in May 2026 with a reputation as a monetary hawk. He scrapped the Fed’s longstanding practice of forward guidance and installed what he calls a “data-driven approach,” meaning the Fed will react to economic conditions as they come rather than committing to a path months in advance.
July 2026 PCE inflation clocked in at 3.7%, nearly double the Fed’s 2% target. Warsh acknowledged the Fed has “work to do” if inflation trends don’t improve, but acknowledgment and action are two very different things.
