The Globe and Mail report in its Friday, July 31, edition that in his second news conference as chair of the Federal Reserve, Kevin Warsh emphasized the Fed's focus on "performance" in tackling a significant inflation challenge. A New York Times dispatch to The Globe reports that following the decision to keep rates at 3.5 to 3.75 per cent, he said, "We are going to be judged by how we perform." Financial markets quickly dismissed Mr. Warsh's approach, which advocated tough inflation rhetoric but avoided endorsing higher interest rates. The $28-trillion U.S. government bond market responded clearly. Long-term government borrowing costs surged as Mr. Warsh spoke, with the 30-year bond seeing its largest one-day increase in over a year, reaching 5.22 per cent, the highest since 2007. The 10-year Treasury yield also rose amid inflation expectations. Stock markets sold off as investors delayed potential rate increases until later this year. Some of those equity losses were recouped Thursday, but jitters across the bond market remained. The markets initially saw the tough talk on price stability as a signal of a willingness to combat inflation but were surprised by the lack of follow-through.