Minneapolis Fed President Neel Kashkari said Sunday that rising Treasury yields do not concern him and reflect a well-functioning bond market, not a policy problem. He kept his inflation concerns alive ahead of September's meeting, leaving the decision open as new Fed Chair Kevin Warsh prepares to speak at Jackson Hole.
Kashkari waves off yield-driven dysfunction fears
Federal Reserve Bank of Minneapolis President Neel Kashkari played down concerns over the recent rise in US Treasury yields on Sunday, telling CBS's Face the Nation that the increase is unlikely to shape the central bank's policy deliberations. He said the Treasury market is functioning as it should, with trades taking place and enough liquidity in the system to let policymakers keep their focus on the federal funds rate as the main lever for bringing inflation back to target.
His remarks push back against any narrative that surging long-end yields signal market dysfunction. The 10-year Treasury yield ended last week near 4.73%, while the 30-year stayed close to its highest level since 2007. Kashkari acknowledged that yields are elevated relative to recent history, but he noted they were meaningfully higher in the 1990s, framing the current level as high without being historically extreme.
Inflation worries stay, hike commitment does not
The remarks arrive ahead of the Fed's September meeting. Officials left interest rates unchanged in July for a fifth consecutive meeting, with Kashkari among three policymakers who dissented in favor of a quarter-point increase over concerns about persistent inflation. Speaking Sunday, he repeated those concerns but stopped short of committing to another dissent or a renewed push for a hike, saying he wants more data before the next meeting and does not want to prejudge the outcome.
He added that he is not currently confident inflation is heading back to target within a short period. As a result, the September meeting stays a genuine decision point rather than a formality, with rate-sensitive assets exposed to incoming data between now and then.
Warsh's Jackson Hole speech looms larger
Markets are also turning attention to new Fed Chair Kevin Warsh, who is due to deliver keynote remarks Friday at the central bank's annual symposium in Jackson Hole, Wyoming. His comments are likely to carry more weight for the policy outlook than Kashkari's Sunday remarks.
Source: Investinglive
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