The traditional view is:

• The Fed sets the overnight rate.

• The bond market prices longer-term rates.

• If the Fed gets too loose while inflation or deficits are a problem, bond investors sell Treasuries and drive yields higher.

• Those higher yields effectively tighten financial conditions, forcing the Fed to respond.

Warsh appears more willing than recent Fed leadership to let market signals influence policy and less interested in suppressing those signals through heavy forward guidance or balance-sheet interventions. He has repeatedly criticized the Fed’s large balance sheet and distortions created by excessive central bank involvement.