The US bond market delivered a sharp rebuke to Federal Reserve Chair Kevin Warsh this week, sending 30-year Treasury yields above 5.2%—a 19-year high—after he reiterated the need to tame inflation but declined to signal further rate rises and hinted the central bank’s 2% target could be revised. The sell-off extended on Thursday, in what Citigroup global chief economist Nathan Sheets called “the markets voting ‘no confidence’ on the Fed and the Fed’s willingness and capacity to bring inflation down.”

Warsh told reporters that the 2% PCE inflation goal was “our number, we’re sticking with it,” before adding that a task force of 15 outside experts he appointed in May might recommend changes to the framework by the end of 2026. He said he would consult the group in the coming weeks and could share any “ready for prime time” ideas at the Fed’s Jackson Hole conference in late August. The combination of hawkish rhetoric, inaction, and the suggestion that the goalposts might move was interpreted by markets as a lack of a credible strategy. “He highlighted a problem and gave no strategy for solving it other than, ‘I’m a hawk, trust me,’ and the markets wanted more than that,” Sheets said.

The unease extends inside the central bank. Three of the 12 voting policymakers dissented against the decision to hold rates at 3.50%-3.75%, including Dallas Fed President Lorie Logan and Cleveland Fed President Beth Hammack, who had previously signalled discomfort with steady rates amid rising inflation. Even some who voted with the chair, such as Governors Christopher Waller and Lisa Cook, have indicated they could back hikes if inflation does not improve. The latest PCE data showed a slight easing in June, but policymakers remain concerned about renewed price pressures from the Middle East conflict and surging investment in artificial intelligence. Sheets noted that Warsh faces a “balancing act” between his hawkish instincts and the White House’s preference for looser policy, and will need to make a choice by September.

Adding to the sense of operational upheaval, Warsh also raised the possibility of reducing the number of regularly scheduled policy meetings from the current eight per year, a practice in place since 1981, according to four sources cited by The New York Times. Such a change would mark the most significant procedural shift under his two-month-old leadership and would sharply curtail the flow of official guidance to markets. With regional Fed presidents expected to speak publicly in the coming days to do “damage control,” as Macquarie strategist Thierry Wizman put it, attention now turns to the Jackson Hole gathering and the September policy meeting, where Warsh’s strategy—or lack of one—will face its next test.