Fed’s Kashkari says rising Treasury yields not a concern

Federal Reserve Bank of Minneapolis President Neel Kashkari stated on Sunday that rising U.S. Treasury yields are not a concern and are unlikely to affect monetary policy decisions. In an interview with CBS’s Face the Nation, Kashkari affirmed that the U.S. Treasury market is operating smoothly with adequate liquidity and trades occurring as anticipated.

This allows the Federal Reserve to concentrate on the federal funds rate as its primary policy instrument to reduce inflation. Treasury yields increased last week, with the 10-year benchmark closing near 4.73%, while the 30-year yield remained near its highest level since 2007. While current Treasury yields are elevated compared to recent times, they were notably higher during the 1990s.

The Fed is set to convene in September, with policymakers meeting in July and maintaining interest rates at the same level for the fifth consecutive time. Among the three officials who disagreed with a quarter percentage point rate increase due to concerns about persistent inflation was Kashkari. On Sunday, he reiterated his concerns about inflation but refrained from committing to supporting a rate hike at the upcoming September meeting.

"We need to see more data, but I don’t want to prejudge the next meeting," Kashkari stated. "But I’m not feeling confident right now that inflation is heading back down to target in a short period of time."