US borrowing costs hit the highest level since 2007 after the Federal Reserve held rates steady, underscoring fears that the central bank will not be able to contain the inflationary shock from Donald Trump’s Iran war.
The 30-year Treasury yield jumped as much as 0.14 percentage points to 5.23 per cent following the Fed decision on Wednesday, signalling worries among investors that surging oil prices triggered by the Middle East conflict could prompt a lasting bout of inflation. The move was the biggest since the fallout from Trump’s “liberation day” announcement in April 2025.
Fed chief Kevin Warsh vowed not to “waver” in the central bank’s battle to cool US price growth after the Federal Open Market Committee left its main rate at 3.5 to 3.75 per cent for the fifth straight meeting. He also argued that a rise in bond yields between the June and July Fed meetings had essentially tightened monetary policy.