Federal Reserve Chairman Kevin Warsh failed his first credibility test according to Ed Yardeni, the economist who coined the term ‘Bond Vigilantes’. The Fed kept interest rates unchanged at its latest meeting, but bond yields surged sharply, with the 30-year yield exceeding 5.2%, levels not seen since 2007. Stock markets also suffered, as the Dow Jones recorded its worst day since April 2025. Warsh acknowledged there’s ‘no magic wand’ to reduce inflation, which stood at 3.7% in June, well above the Fed’s 2% target. Traders are now pricing in a quarter-point rate hike at the next Fed meeting in September, with a 60% probability.
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