Rising Treasury Yields Limit Warsh’s Fed Rate-Cut Option as Inflation Pressures Build

U.S. Treasury yields climbed across the curve as Kevin Warsh prepares to take over as Federal Reserve chair, tightening financial conditions and reducing market expectations for a near-term rate cut. The 30-year Treasury yield rose above 5% in the week of May 11, 2026, while the 10-year yield neared 4.5% and the policy-sensitive 2-year yield touched 4%. The 2-year yield is now above the top of the Fed’s 3.7% target range, an unusual signal that bond investors expect policy to stay restrictive. Inflation risks remain elevated. Gasoline prices have exceeded $4.50 a gallon nationally, with parts of California above $6.50, amid the Iran war. April CPI was near 4%, well above the Fed’s 2% target. CME FedWatch data as of May 14, 2026, showed traders pricing nearly a 40% chance of a Fed rate increase by early December, about a 60% chance of no change and less than 2% odds of a cut.