Expectations for lower U.S. interest rates are weakening as Treasury yields climb to their highest levels in more than a year and Federal Reserve Chair Kevin Warsh signals that inflation may require tighter policy instead. The benchmark 10-year U.S. Treasury yield climbed to roughly 4.79%, its highest level since January 2025, during a broad selloff in government bonds.
CNBC host Jim Cramer added to the hawkish narrative on Tuesday, saying he does not see how interest rates can move lower under the current combination of Fed policy, geopolitical tension and rising energy prices. Brent crude has risen above $90 as renewed U.S.-Iran tensions threaten energy flows through the Strait of Hormuz, increasing inflation risks just as the Fed debates whether monetary policy is restrictive enough. Markets are now assigning a significant probability to another Fed rate increase in September rather than a cut.
Kevin Warsh, who has chaired the Federal Reserve since May 2026, argued at Jackson Hole on Aug. 28 that inflation remains too high and signaled that additional tightening may be necessary if price pressures fail to move convincingly toward the Fed’s 2% target. That represents a notable change from earlier expectations that the Fed’s next major move would eventually be lower rates.
The shift puts the Fed on a direct collision course with President Donald Trump, who has repeatedly called current interest rates of 3.50% to 3.75% too high. Traders are now pricing a 25 basis point hike in September, and this week’s jobs data could be the decisive trigger shaping whether the Fed hikes or pauses. Weak data could reverse the trend, supporting a risk-on move across crypto markets.
Higher Treasury yields raise pressure on stocks and crypto because higher risk-free yields increase the appeal of cash and government bonds relative to non-yielding assets. Bitcoin has previously faced pressure during Treasury selloffs, and long-duration growth stocks can be especially sensitive to rising yields.
