Yields on 10-year Treasuries soared Friday after Chicago Federal Reserve President Austan Goolsby warned the central bank, which has cut interest rates three times since September, against further cuts.
The benchmark 10-year Treasury yield rose more than 4 basis points to 4.188%, while the 2-year Treasury yield fell less than 1 basis point to 3.526%. The 30-year Treasury yield rose more than 6 basis points to 4.852%.
One basis point equals 0.01%, and yields and prices move in opposite directions.
On Friday, Goolsby said in an interview with CNBC that he was “quite optimistic” that interest rates would be “substantially lower” in 2026, but was “uncomfortable with the way we cut rates too early and assumed that the inflation we’ve seen so far is temporary.”
Separately, Goolsby said in a formal statement Friday that he believes policymakers “should have waited” for more data before announcing further rate cuts. That’s despite him voting in favor of rate cuts at the Fed’s September and October meetings.
Goldsby, who has a Ph.D. in economics from the Massachusetts Institute of Technology, spoke Wednesday after the Fed cut interest rates for the third time since September. The 10-year Treasury yield was 4.21% before the Fed’s latest decision, but it fell to 4.10% on Thursday before rebounding on Friday.
Bond investors are looking to see where monetary policy will go in 2026, after Mr. Powell’s term as Fed chair ends in May and a potentially more dovish chairman is named by President Donald Trump to replace him. The president told the Wall Street Journal on Friday that Kevin Warsh is at the top of the list for Fed chairs.
As the Fed looks ahead to 2026, striking the delicate balance between supporting a softening labor market and calming inflation will be central to its policy decisions. The balance of public opinion on Wall Street has converged around the idea that the Fed will be inclined to cut rates further if the labor market does not recover.
Fed Chairman Jerome Powell said multiple times in Wednesday’s press conference that job growth in recent months is likely negative, a situation that supports easy monetary policy.
Chairman Powell said, “The labor market continues to cool down gradually.” “Both household surveys and business surveys show that demand and supply of workers are decreasing. So I think we can say that the labor market is gradually cooling down a little bit more than we thought.”
The central bank reappointed 11 of 12 regional bank presidents on Thursday, ending brief speculation that President Donald Trump, a critic of the Fed, would fire some regional bank presidents and disrupt operations.
—CNBC’s Jeff Cox contributed to this report.
