President Donald Trump has made it clear that he wants lower interest rates, but his latest comments won't stop the Federal Reserve from hiking.

The administration's core mandate remains lower interest rates, with Treasury Secretary Scott Bessent going as far as doubling long-term debt buybacks as yields surged last month. But Trump appears largely willing to give Fed Chairman Kevin Warsh some breathing room for now.

"I have a lot of respect for [Warsh] and he'll do what he has to do. I think our interest rates are too high," Trump said Monday when asked about Warsh potentially raising interest rates. "We should have the lowest interest rates in the world...Some day I think we'll be able to convince people of that."

That's in sharp contrast to Trump's interactions with previous Fed chair Jerome Powell, in which the president continuously ratcheted up tensions in an effort to get rates lower. That makes Trump's deference to Warsh notable, and makes it unlikely the president's position will be a significant factor in the Fed's decisions around rates in the near term.

Trump went on to say that he doesn't believe that economic success and growth cause inflation. He noted that when a country is at a better credit risk, bankers should cut rates, not raise them.

Bessent also weighed in on Monday, saying that while he wouldn't speculate on the Fed's next move, he believed there was still a case for holding rates steady.

"It is my belief that we've seen a supply shock. And traditionally, you don't raise [rates]...unless you see second or third order effects, and we are seeing the core inflation has remained very, very restrained," Bessent said in an interview with CNBC.

Yet Warsh's recent emphasis on inflation trends, rather than individual data points, suggests he has made his mind up, says James Knightley, chief international economist at ING.

With no one on the Federal Open Market Committee openly hostile to a rate hike, Knightly says a quarter percentage rate hike looks more likely than a hold at the upcoming Sept. 15-16 FOMC meeting.

"With Treasury Scott Bessent watching nervously as longer dated yields climb, he too is likely to be on board and even the President seems OK with it," Knightley says.

Warsh gave a hawkish speech at the annual Jackson Hole Economic Policy Symposium on Friday that recalibrated the markets' expectations in favor of a rate hike at the September policy meeting. Warsh noted that the Federal Open Market Committee has signaled its "joint readiness to act" as circumstances might require. This comes after three regional Fed presidents already dissented at the July meeting in favor of a rate hike.

The surge in the expectations for a rate hike-the CME FedWatch tool on Wednesday had the odds at 64% of a rate increase at the September meeting-would typically provide some confidence that the Fed is on a mission to lower inflation. But Knightley and others contend that it isn't just inflation that is pushing up government bond yields at the long end of the curve. The break-even inflation rates using Treasury inflation-protected securities (TIPS) are looking pretty good and yields continue to rise despite Fed hikes being priced in.

"This is a real rates story that, I think, is increasingly being led by concerns about fiscal sustainability worries, not just in the U.S., but around the world," Knightley says.

Higher government borrowing costs are contributing to higher mortgage rates and corporate borrowing costs, which likely will act as a headwind to overall economic activity.

Fed rate hikes could make things worse by raising the interest cost even further and worsening the deficit, but the central bank's credibility is not driving the extra yield investors are now demanding for holding long-dated bonds.

In fact, the New York Fed's measure of the 10-year term premium has moved sideways over the past 12 months. That indicates there's been no deterioration in how the market prices U.S. fiscal sustainability or that Fed credibility is worse today than 12 months ago, writes Apollo's Torsten Sløk.

Still, higher interest rates, either driven by the Fed or the bond market, will likely create challenges for Bessent, who has set a goal of delivering a fiscal deficit of 3%. That was last achieved in 2015 and the Congressional Budget Office is projecting that the deficit will average over 6% per year over the coming decade.

"This is what the bond market is watching and with continuing debt issuance from tech firms, yields look set to remain elevated and that will act as a brake on broader growth," Knightley says.