Warsh urges bigger role for bond market

According to Federal Reserve Chairman Kevin Warsh's statements, the U.S. central bank is aiming to strengthen the role of the bond market in setting interest rates, with the goal of making monetary policy decisions more reliant on economic data rather than direct guidance. This approach is especially important given the rising inflation, which is nearing 4%, thereby impeding the bank’s ability to move swiftly. Consequently, this strategy has led to fluctuations in long-term bond yields, with the 30-year bond yield reaching its highest level since 2007, and the 10-year yield touching levels not seen since January 2025, amid volatility in oil markets and economic outlooks. This approach faces challenges due to the lack of clear future guidance, requiring investors to assess risks on their own and increasing borrowing costs, while debates over the bank’s independence and influence continue.

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