Treasury Secretary Scott Bessent believes inflation is cooling, supporting potential interest rate cuts by the Federal Reserve. However, he acknowledges the Fed’s prudence in waiting for greater clarity regarding geopolitical factors, particularly the situation in Iran.
Bessent previously urged for faster rate reductions but now understands a cautious approach, noting declining Treasury yields reflect easing inflation expectations.
READ MORE FROM CNBC
Treasury Secretary Scott Bessent expressed confidence on Tuesday that inflation is moderating, creating space for the Federal Reserve to consider interest rate cuts. However, he also indicated understanding for a cautious approach from the central bank, particularly given the ongoing impacts of the Iran war.
"I am highly confident that the core inflation... which is quite under control and actually dropping in many categories, will continue to go down," Bessent stated to reporters at the Semafor World Economy Conference in Washington, D.C. He added, "I believe rates should be cut, but that if they want to wait for some clarity, I understand that."
Recent economic data revealed a 0.9% rise in consumer prices and a 0.5% increase in producer prices in March, largely attributed to elevated energy costs following the start of the Iran war in late February. Despite this, core inflation remained subdued, increasing by 0.2% for consumers and 0.1% for wholesalers.
Bessent highlighted the decline in Treasury yields as a reflection of lowered inflation expectations, spurred by a recent ceasefire and subsequent drop in oil prices. He previously advocated for quicker rate cuts, stating in January that reductions were "the only ingredient missing for even stronger economic growth."
The Fed is currently expected to maintain steady rates throughout the year, with minimal expectations of a hike. Bessent noted the strong economic performance in January and February. The future of Fed Chair Jerome Powell's position is also uncertain, pending Senate confirmation of President Trump's nominee, Kevin Warsh, which is currently blocked by Senator Thom Tillis due to an ongoing investigation into Fed building cost overruns.
Related Video:
Treasury Secretary Bessent: Fed should wait and see on rate cuts (1:58)
