Yardeni Sees Fed Raising Rates 0.25 Point in July as 30-Year Yield Tops 5%
Updated
Updated · CNBC · May 18
Yardeni Sees Fed Raising Rates 0.25 Point in July as 30-Year Yield Tops 5%
3 articles · Updated · CNBC · May 18
Ed Yardeni said the Fed is likely to deliver a quarter-point rate hike in July, a call that sharply departs from market pricing and consensus expectations.
A 30-year Treasury yield above 5% and a recent inflation flare-up tied largely to the Iran war have, in his view, put "bond vigilantes" in charge of financial conditions and forced the Fed to reassert anti-inflation credibility.
Kevin Warsh, who is set to chair the June FOMC meeting, has previously argued for cuts from the current 3.5%-3.75% target range, but Yardeni said his dovish stance is already drawing a negative bond-market reaction.
FedWatch pricing now implies a 42% chance of a hike by year-end, though only 4.2% for July, underscoring how far Yardeni's forecast sits outside prevailing expectations.
Yardeni argues an early hawkish turn could eventually lower real-world borrowing costs by calming long-term yields, easing mortgage and corporate financing pressure.
Has the Federal Reserve lost control of interest rates to the bond market's 'vigilantes'?
With bond markets forcing rate hikes, can the stock market's 'earnings-led meltup' actually happen?
Could the new Fed chair's radical 'regime change' plan unintentionally trigger a financial crisis?
Surging Treasury Yields and Persistent Inflation: How Geopolitics and Fed Policy Are Shaping the 2026 U.S. Economic Outlook
Overview
As of May 18, 2026, U.S. Treasury yields have surged, with the 10-year yield nearing a one-year high, reflecting deep concerns about persistent inflation and fiscal sustainability. If yields rise to 5% or above, experts warn this would be unsustainable, potentially forcing the Treasury secretary to intervene with measures like shortening debt maturities, using buyback tools, or coordinating with the Federal Reserve to purchase long-term bonds. These interventions, described as financial repression, highlight the market’s anxiety over sticky inflation and the risk of a destabilizing 'end game' for the bond market if current trends continue.