Treasury Secretary Calls for 50% Rate Cut Amid Inflation Surge

U.S. Treasury Secretary Scott Bessent has called for the Federal Reserve to consider a 50 basis point interest rate cut in its upcoming September meeting. This recommendation follows the Federal Reserve's decision to keep interest rates unchanged in its previous meeting. Bessent's comments come as the latest inflation report was released, showing that the Consumer Price Index (CPI) rose by 0.2% in July, while the core CPI, which excludes food and energy, increased by 0.3%. These figures align with economists' expectations, despite the significant tariffs imposed by President Trump.

Bessent noted that the data revealed a surprising trend in inflation, with service sector prices rising more sharply than expected, while goods prices remained relatively stable. He expressed that the initial assumptions about the impact of tariffs on inflation were incorrect. "Everyone thought we would see inflation in goods prices, but instead, we saw a strange inflation in services," Bessent stated.

In addition to his comments on monetary policy, Bessent also addressed the potential changes in the Federal Reserve's leadership. He expressed anticipation for the confirmation of Stephen Moore, the newly nominated member of the Federal Reserve Board, who is expected to participate in the September policy meeting. Moore, currently the chairman of the White House's Council of Economic Advisers, will need Senate approval for his position, which has a term until January of the following year. Bessent suggested that Moore might be asked to serve the full 14-year term.

Bessent highlighted that Moore's appointment would bring a significant new voice to the Federal Reserve, altering its composition. He also discussed the criteria for selecting the next Federal Reserve Chairman, emphasizing the importance of the candidate's views on monetary and regulatory policies, as well as their ability to manage and reform the Federal Reserve's organization. Bessent criticized the Federal Reserve's recent expansion, stating that it has compromised its independence in monetary policy.

Bessent also touched on the ongoing trade negotiations, expressing optimism about reaching substantial agreements with major countries in the coming months. He noted that the negotiations are progressing well and that significant progress is expected soon.