Treasury yields have climbed to their highest level since 2004, creating a dilemma for the Federal Reserve and its chairman Kevin Warsh. Markets now anticipate at least three rate hikes by early 2027, potentially five or six according to some economists, as inflation remains stubbornly above the 2% target. At 5.5%, the 10-year yield would cut growth to 1.5% and lift unemployment to 4.7%, while still failing to bring inflation back to 2%. Key Fed officials are urging caution but warn that unclear communication could trigger an outsized market reaction.
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