US Treasury Secretary Bessent: Notice, Trump has stopped calling for Fed to cut rates.

US Treasury Secretary Bessent: Notice, Trump has stopped calling for Fed to cut rates.

The US Treasury Secretary, Scott Bessen, recently made headlines with his statement that President Donald Trump is now prioritizing lower long-term interest rates over immediate calls for the Federal Reserve to cut short-term rates [1]. This shift in focus comes as the economy continues to show signs of resilience, with inflation cooling off and tariff-related fears subsiding.

Bessen's comments reflect Trump's long-standing desire for lower interest rates, which he had previously urged the Federal Reserve to implement through short-term rate cuts [1]. However, as the economy has evolved, Bessen now believes that longer-term rates, such as the benchmark 10-year US Treasury yield, are more critical to the administration's goals of promoting growth and reducing borrowing costs.

The reasons for Bessen's focus on long-term rates are multifaceted. For one, inflation has slowed significantly from its recent peak, allowing the Federal Reserve to pause its tightening campaign [1]. Additionally, tariff-related fears that drove up long-term yields following Trump's election have eased, as the administration temporarily paused tariffs against Canada and Mexico and reached a trade deal with China [1].

Moreover, Bessen believes that Trump's policies of energy dominance, deregulation, and non-inflationary growth will contribute to a natural decline in long-term interest rates [1]. However, some analysts are skeptical, pointing out that there isn't much room for long-term borrowing costs to fall in the near future [1].

Despite these concerns, Bessen's comments are likely to influence market expectations and investor sentiment. Long-term rates have already been coming down after spiking following Trump's election, and Bessen's statements suggest that this trend is likely to continue [1]. However, investors remain cautious, as tariffs and potential tax cuts could still drive up inflation and impact borrowing costs.

References:

[1] Scott Bessent, US Treasury Secretary, Says Trump Wants Long-Term Rates to Fall, It May Take a While. Investopedia. Retrieved from https://www.investopedia.com/scott-bessent-treasury-secretary-says-trump-wants-long-term-rates-to-fall-it-may-take-a-while-8787468