Kashkari: U.S. Treasury Market Functioning Normally, Elevated Yields Do Not Affect Policy Tool Selection
Nashnova编辑部
Minneapolis Fed President Kashkari said the Treasury market has ample liquidity and is functioning well — high yields won't push the Fed away from using the fed funds rate as its primary tool to fight inflation. But he still lacks confidence inflation will return to target soon, saying he needs to 'see more data' before committing to another rate hike in September.
Yields are surging — is the Fed worried?
Kashkari was explicit: the Treasury market is trading normally with ample liquidity, so there is no reason to switch tools.
This means → the Fed will keep using the fed funds rate as its main lever to push inflation down, rather than pivoting to other operations just because long-end yields are elevated.
In plain terms = as long as Treasuries can be bought and sold smoothly, high yields alone are not a problem — the Fed steers policy through short-term rates, and that playbook stays.
How high are yields, really? What does history say?
Last week the 10-year Treasury yield closed at roughly 4.73%; the 30-year yield remains near its highest level since 2007.
Kashkari noted, however, that yields in the 1990s ran well above current levels.
This means → on a longer historical scale, today's rates are not unprecedented — they only look extreme compared to the unusually low-rate era of the past decade-plus.
The Treasury stepped in with buybacks — did it work?
The U.S. Treasury announced it would ramp up long-bond buybacks, at least doubling the size of liquidity-support repurchases for 10- to 30-year maturities.
Yields across the curve dropped on the news — then gave back the gains.
This reflects a market view that such operations can suppress borrowing costs only briefly without altering the longer-term trend — a painkiller, not a cure.
Where does Kashkari himself stand on rate hikes?
He was one of three dissenting officials at the July FOMC (Federal Open Market Committee — the Fed body that sets interest rates) meeting, voting for a 25-basis-point hike on persistent-inflation concerns.
He repeated those concerns but stopped short of pledging another hike in September, saying only that he "needs to see more data."
In plain terms = his stance is "hawkish but not committed" — leaning toward further tightening, yet leaving room for the data to decide.
What is the market watching next?
The Fed's next meeting is scheduled for September.
This week's focal point is Fed Chair Waller's first keynote address at the Jackson Hole Global Central Banking Symposium, set for 10:00 PM Beijing time on August 28.
This means → Waller's comments on long-end yields, the inflation-fighting roadmap, and the rate path will directly shape market expectations for the September meeting.
Content is for reference only, not financial advice.