Fed Chairman Kevin Warsh left interest rates unchanged on Wednesday. Bond investors tightened the screws anyway.

The 30-year Treasury yield climbed another 6 basis points Friday to 5.27%, its highest since 2007. Two days earlier, Warsh had sounded almost pleased that markets were doing some of the work.

“At some level, we haven’t done much in 42 days,” he said on Wednesday. “The markets have done quite a bit.”

Warsh is betting markets can do part of the Fed’s job. The central bank controls the overnight interest rate — the shortest end of the yield curve. Investors set longer-term Treasury yields, which help determine the rates households pay for mortgages and companies pay to borrow.

The Fed has held its overnight rate target at 3.5% to 3.75% throughout 2026. But since Warsh’s first meeting in June, the 30-year yield has risen about 34 basis points — or 0.34 percentage points. The 10-year has gained about 24 basis points, while the 2-year is up about 10.

In other words, rates have risen across most of the market, with the biggest increases at the longer end — where Treasury yields influence mortgages and other major borrowing costs.

What comforts the Fed can hurt borrowers.

Markets “have tightened financial conditions in this intermeeting period,” Warsh said, adding that the move had provided policymakers “some comfort” that they could bring inflation back to target.

Warsh is not merely tolerating that market pressure. He wants markets to play a bigger role.

His approach echoes that of former Fed Chair Alan Greenspan, who favored less public hand-holding and more room for investors to form their own views. Warsh has pulled back from forward guidance — the Fed’s practice of signaling what it may do next — because he wants an “unfiltered message” from buyers and sellers rather than market prices that simply echo the Fed’s latest forecast.

That leaves more of the tightening in the hands of bond vigilantes, investors who push government borrowing costs higher by demanding better returns.

Alfonso Peccatiello, founder of the Macro Compass, argues that markets can keep applying pressure until (1) borrowing costs are high enough to slow the economy and inflation, (2) betting against bonds becomes too expensive, or (3) weaker data persuades investors that no further tightening is needed.

None of those off-ramps is painless.

The first means households and businesses absorb higher borrowing costs. The second requires bond investors to take losses or abandon the trade. The third may arrive only after the economy has already weakened.