Warsh’s bold inflation talk tests Fed credibility as markets read the yield curve

Warsh signaled a potential regime change at the Fed by hinting at tools beyond rate hikes and considering inflation gauges beyond the Fed’s preferred metric, prompting a Treasury selloff and higher yields that some analysts label a “central bank inflation credibility shock.” Economists say the yield curve will reveal whether markets still trust the Fed to rein in inflation, with a flatter curve implying credibility and a steeper one signaling concerns about being behind the curve; Friday’s payroll data will be a crucial test.