Federal Reserve is losing credibility, at the worst possible time
Posted on July 30, 2026 by Tipswatch
By David Enna, Tipswatch.com
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The Federal Reserve controls the short-term end of the bond market, where the U.S. Treasury has been shifting its borrowing in recent months because the short-term rate of about 3.75% is a lot more appealing than a 10-year note at 4.67%.
Take a look at this chart. After recent decisions to cut short-term interest rates, the longer-end of the Treasury curve has risen, sharply. The bond market is questioning the Fed’s credibility. In fact, I think an increase in short-term rates would cause longer-term yields to fall, not rise.
Many times, Warsh delivers strong and inspiring statements on price stability, and then drifts into new ways of measuring inflation, replacing the Fed’s standard PCE index as a basis for rate decisions…
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Any comment by a Fed chair that they will base interest rate decisions on a fudged inflation index will narrow the eyes of skeptical bond investors.
Wendy