WASHINGTON — Federal Reserve Chair Kevin Warsh, appointed by President Donald Trump, acknowledged persistent inflation pressures in his second press conference on the job, offering no clear path to lower interest rates despite Trump’s repeated calls for cuts.
Benchmark Treasury bond yields surged to their highest levels in nearly two decades this week, reversing Trump’s 2024 pledge to reduce borrowing costs. The 10-year U.S. Treasury note exceeded 4.7% on Friday, surpassing rates when Trump returned to the White House last year. The 30-year Treasury bond also hit multi-decade peaks, tightening financial conditions for households and the federal government.
Trump has continued to frame the economy as robust, despite data showing annualized growth of just 1.5% in the prior quarter. Speaking to his Cabinet on Friday, he stated, ‘We have the most successful environment that we’ve ever had.’ Neither Trump nor Treasury Secretary Scott Bessent addressed rising rates during the public portion of the meeting. A White House spokesman declined to comment on the bond market surge when asked by reporters.
The government’s interest payments have ballooned to $827 billion in the current fiscal year, exceeding annual defense spending. Higher rates have also dampened housing affordability, with mortgage costs climbing alongside auto loan expenses. The economic strain coincides with escalating geopolitical tensions, including the ongoing conflict in Iran, which has contributed to market volatility.
Federal Reserve officials, including Warsh, have emphasized the need to balance inflation control with economic growth. Warsh’s remarks followed a period of heightened pressure from Trump, who has repeatedly characterized high rates as an obstacle to prosperity. The president has argued that lower borrowing costs would act as ‘Rocket Fuel’ for the economy, though recent trends suggest the opposite.
Economists note that sustained high rates could further slow business investment and consumer spending, potentially widening the gap between Trump’s rhetoric and economic indicators. The Treasury’s rising yields also signal investor concerns about long-term fiscal stability, as the national debt approaches $35 trillion. Analysts warn that without a coordinated policy response, the trend could persist into 2025, complicating Trump’s economic agenda ahead of the election.