Federal Reserve Chair Warsh said at a press conference on the 16th that he does not believe the recent rise in U.S. Treasury yields is driven by eroding confidence in the Fed's ability to contain inflation. Warsh cited solid U.S. economic growth and a surge in capital spending as the backdrop for higher borrowing costs, saying hyperscaler companies are raising funds in the market and that competition for capital is genuinely underway. He added that geopolitical uncertainty around the world is also pushing up long-term interest rates, and that its effects extend beyond spot prices for energy and agricultural products to crack spreads and the prices of products sold in stores across the United States. New York Fed President Williams expressed a similar view earlier this month, saying the rise in yields reflected a strong U.S. economy and economic outlook supported by massive investment in artificial intelligence, data centers and the technology sector. Warsh, meanwhile, rejected the view that concerns over whether inflation can be brought back to the Fed's 2% target, or over the sustainability of the fiscal deficit, are the main drivers of higher yields, stressing that while he will keep a close eye on market price moves, today's decision was one we made ourselves.
Warsh attributes the rise in Treasury yields to solid growth, surging capital spending, and geopolitical uncertainty rather than eroding Fed credibility, reinforcing the higher-yield narrative.
