The Bond Market Is Sending a Warning to the Fed

ABOUT THE EPISODE The bond market is putting new pressure on the Federal Reserve as long-term yields climb and investors question the Fed’s approach to inflation.

Wharton Professor of Finance Nikolai Roussanov explains why Kevin Warsh’s recent comments unsettled markets, why the Fed’s “reaction function” matters, and how rising yields could eventually force the Fed to act.

The conversation also explores the tension between monetary and fiscal policy, including Treasury efforts to push long-term rates lower and why those efforts could work against the Fed’s strategy. With inflation, energy prices and government deficits all complicating the outlook, can the Fed preserve its credibility and still get inflation back to 2%?

ABOUT THE PODCAST This Week in Business features interviews with Wharton faculty about the latest news, fascinating trends, and issues impacting both consumers and the business world. Episodes are recorded at the Wharton School and published twice per week.

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