Wash's first major speech after 100 days in office mentioned inflation 25 times but completely sidestepped the issue of long-term U.S. Treasury bonds; how can the Fed balance fighting inflation against the pressure from $40 trillion in U.S. debt?

However, tightening monetary policy could further strain already-high government financing costs and long-term market interest rates. Economists: The Fed bears responsibility for the sharp rise in long-dated bond yields; Bessent’s $14 billion buyback is futile. Wash made no mention whatsoever of Treasury Secretary Scott Bessent’s recent announcement expanding the Treasury’s bond buyback program—a move seemingly at odds with Wash’s stated preference for reducing government intervention in markets. In early September, the U.S. Treasury announced it would double the scale of its ‘liquidity-supporting buybacks’ for nominal Treasury securities with maturities of 10–20 years and 20–30 years, raising the per-transaction cap from $2 billion to at least $4 billion, effective September 9 and continuing through November 4—the end of this quarter’s refinancing cycle. Based on prior arrangements for long-dated buybacks, this amounts to an additional $14 billion in buyback capacity for the quarter. This round of intervention briefly worked: following the plan’s announcement, long-term Treasury yields fell sharply—only to rebound thereafter. On August 24, media citing two senior Treasury officials reported that the Treasury could fund its bond-purchase program using nearly $1 trillion held in its Treasury General Account (TGA). NBD: Recently, the yield on U.S. 30-year Treasuries briefly surged past 5.3%. What are the main drivers behind this sharp rise in long-term Treasury yields? Maurice Obstfeld: First, markets face uncertainty regarding the Fed’s path for tackling inflation. Investors worry whether the Fed will stand by as inflation reaccelerates—forcing it later to implement larger, more prolonged rate hikes. Second, the U.S. federal fiscal deficit may expand further. Global investors must absorb a continuously growing supply of U.S. Treasuries, yet central banks worldwide no longer provide stable, consistent demand as they once did—pushing yields upward. Moreover, the U.S. Social Security and Medicare systems face looming solvency pressures after 2030, while U.S. policymakers have shown little political will to address these challenges. Benoît Ann: The Fed’s recent adjustments—and even omissions—in its communication strategy have heightened policy uncertainty, thereby increasing interest-rate volatility and overall term premiums. Market concerns about the U.S. policy framework and fiscal trajectory have also lifted risk premiums. Additionally, current U.S. macroeconomic fundamentals do not support a substantial decline in market interest rates. NBD: Has the Treasury’s expansion of long-dated Treasury buybacks effectively eased upward pressure on long-end yields? Benoît Ann: It must be clarified that this operation is not quantitative easing, because the net supply of Treasuries remains unchanged. In most cases—whether in foreign exchange markets or elsewhere—market interventions tend to have limited effects, since such interventions typically fail to resolve the underlying fundamental factors that originally caused the ‘undesirable’ market moves. In short, this measure is merely a stopgap. Barry Eichengreen: I believe this operation is futile. For every long-term Treasury the Treasury buys, private investors can simply sell an equivalent amount. The only factor capable of exerting sustained influence on yields is fundamentals—specifically, a shift in expectations regarding the fiscal deficit.

From dovish to hawkish: Minneapolis Fed President Neel Kashkari says inflation remains elevated and expects one rate hike this year.

Neel Kashkari, President of the Federal Reserve Bank of Minneapolis, stated that, given signs of broader-based inflation, he revised his interest-rate outlook for this year in the Fed’s latest economic projections released earlier this month—to one rate hike. Kashkari had forecast one rate cut in March, but has now shifted to forecasting one rate hike. He emphasized that the final decision will depend on forthcoming economic data. According to Bloomberg, Kashkari said in an interview on Friday: “I am concerned about inflation—not just due to developments in the Middle East, but more importantly, because we’re seeing broader-based inflationary pressures across the economy.” Later that day, speaking at a forum, Kashkari reiterated the Fed’s commitment to returning inflation to its target level. He added: “Our challenge is to bring inflation down to target within a reasonable timeframe—without inflicting severe damage on the labor market. That is precisely the problem we’ve been striving to solve.” He also noted that a series of supply shocks have complicated the fight against inflation—including the impact of the U.S. war against Iran this year.

Fed's Kashkari Says Inflation Still Too High Across US Economy in Fox News Interview

Sep 20, 2026

Fed President Kashkari stated inflation remains high across all sectors beyond energy and food, amid Middle East conflicts driving crude oil prices higher. He supported recent interest rate hikes to combat persistent economic inflation.

reuters

2026-09-20

Fed's Kashkari Says Inflation Still Too High Across US Economy in Fox News Interview

Fed's Kashkari Says Inflation Still Too High Across US Economy in Fox News Interview

FAQ