Concerns over stubborn inflation are reportedly now once again rattling Wall Street and raising questions about whether the Federal Reserve may be forced to raise interest rates — a possibility that cuts against President Donald Trump’s long-running push for lower borrowing costs.
During Monday’s edition of Fox Business’ “Mornings with Maria,” anchor Maria Bartiromo agreed with analyst Ryan Payne that the central bank could soon find itself under pressure to tighten monetary policy rather than loosen it.
The discussion followed Bartiromo’s interview on “Sunday Morning Futures” with investor Jeffrey Gundlach, who warned that a Federal Reserve interest rate hike was now an “odds on bet.” Bartiromo had raised the possibility that newly appointed Federal Reserve Chair Kevin Warsh could move rates higher despite hopes from many in Washington for cuts.
That possibility stands in sharp contrast to Trump’s public campaign over recent months criticizing former Federal Reserve Chair Jerome Powell for refusing to lower rates. Trump had repeatedly pressured the Fed to reduce borrowing costs and expressed optimism that new leadership at the central bank would take a different approach.
But Payne argued Monday that the bond market is now flashing warning signs that inflation may remain elevated longer than expected.
“Yeah, I think he’s 100% right,” Payne said in response to Gundlach’s prediction.
According to Payne, the recent jump in Treasury yields reflects growing investor concern that inflation pressures are becoming more persistent. He pointed to the 10-year Treasury yield climbing from 4.3% to 4.6% in just two weeks since his prior appearance on Bartiromo’s show.
In his view, markets are increasingly pricing in a future where inflation remains hotter for longer, leaving the Federal Reserve with fewer options.
Payne noted that the Fed’s benchmark funds rate currently sits between 3.5% and 3.75%, while inflation is tracking near 4%.
“I’d also mention the Fed’s fund rate is at 3.5 – 3.75%, inflation tracking at 4% right now, and Jeffrey made a really good point yesterday, you’re into a point where you’re going to have negative interest rates again,” Payne said.
He also referenced the so-called “TINA” trade — shorthand for “There Is No Alternative” — which reflects how much investor money remains parked in money market funds.
“There is so much money sitting in money market funds right now getting like 3.3 – 3.4% but if inflation’s at 4[%], that’s a real problem,” Payne added.
The analyst went on to argue that bond investors, sometimes referred to as “bond vigilantes,” are effectively warning policymakers that additional action may be needed to keep inflation under control.
“The bond vigilantes have spoken, and what they’re telling you is the Fed probably has to raise rates here just to keep inflation in check because, clearly, right now we’re pricing in a much different market than we were just two weeks ago,” Payne said. “Which is kind of wild.”
Bartiromo agreed with the assessment while also noting that Trump continues to argue the inflationary pressures are temporary.
“Yeah, it’s true and, of course, the president continues to say that this is a temporary situation, Ryan,” Bartiromo responded.
The exchange underscored the difficult balancing act now facing the Federal Reserve as inflation concerns continue to weigh on markets and American consumers alike, even as political leaders push for policies designed to spur economic growth without triggering deeper financial strain.
