U.S. Treasury Secretary Bessent: Fed choking off growth with high interest rates

U.S. Treasury Secretary Bessent: Fed choking off growth with high interest rates

U.S. Treasury Secretary Scott Bessent has expressed growing concern over the Federal Reserve's (Fed) high interest rates, which he believes are stifling economic growth. In a recent interview on NBC's Meet the Press and an op-ed published in The Wall Street Journal, Bessent outlined several critiques of the Fed's policies, including its "mission creep" and "institutional bloat" .

Bessent argued that the Fed's slow action on interest rates is putting the central bank behind the curve, particularly in light of a weak jobs report released in August. The economy added only 22,000 jobs, falling short of the 75,000 expected, and the unemployment rate rose to 4.3% . The Treasury Secretary noted that President Trump's warnings about the Fed's delayed response were prescient, stating that the Fed should have lowered rates earlier to prevent economic slowdowns.

Bessent also emphasized the need for the Fed to conduct an "honest, independent, nonpartisan review" of its policies and to simplify its toolkit. He criticized the Fed's use of nonstandard policies and its expanded balance sheet, which he believes influences where capital goes, a domain traditionally left to markets and elected officials.

In addition to his critiques, Bessent hinted at the possibility of a change in leadership at the Fed. He mentioned that the search for a new Fed chair is narrowing, with National Economic Council Director Kevin Hassett, Fed Governor Christopher Waller, and former Fed Governor Kevin Warsh as the top three candidates. Hassett, in particular, has emphasized the need for the Fed to be fully independent of political influence, including from the current occupant of the Oval Office .

The Fed is expected to meet on September 16 and 17, with markets widely anticipating a 25-basis-point rate cut. This move would be a response to increasing downside risks to the labor market, as suggested by Fed Governor Waller, one of Trump's top three picks for the next Fed Chair .

Bessent's statements underscore the ongoing tension between the Treasury Department and the Fed over monetary policy. As the economy faces potential headwinds, both institutions are under scrutiny to ensure that their actions promote sustainable growth and stability.

References:
https://www.straitstimes.com/world/united-states/us-treasury-secretary-bessent-says-russian-economic-woes-can-bring-putin-to-table
https://finance.yahoo.com/news/bessent-turns-up-heat-on-fed-as-trump-reveals-top-3-picks-to-replace-powell-161326834.html