Treasury Secretary Scott Bessent mentioned on Sunday that certain sectors of the U.S. economy, especially housing, might already be experiencing a recession due to elevated interest rates. He reiterated his suggestion that the Federal Reserve should hasten its rate cuts.
“I think we’re generally okay, but in some segments, we’re facing a recession,” Bessent stated during his appearance on CNN’s “State of the Union.” He pointed out that the Federal Reserve’s actions have led to various distribution challenges.
While the overall U.S. economy holds strong, Bessent pointed out that high mortgage rates are impacting the real estate market significantly.
He noted that the housing market is essentially in a recession, affecting lower-income individuals the most, as they are often loaded with debt rather than assets.
According to the National Association of Realtors, pending home sales in the U.S. were unchanged in September.
Bessent described the current economic landscape as transitioning.
Last week, Federal Reserve Chairman Jerome Powell indicated that there might not be another rate cut at the Fed’s meeting in December, which has drawn criticism from Bessent and other officials from the Trump era.
Stephen Milan, currently on leave from his position as chair of the White House Council of Economic Advisers, stated in an interview with The New York Times that the Fed could bring about a recession if it does not promptly lower interest rates.
Milan, who is anticipated to resume his White House role in January, was among two central bank governors who opposed the Fed’s recent 25 basis point rate cut, preferring a more aggressive 50 basis point cut instead.
“If tight policies persist over an extended period, monetary policy itself could lead to a recession,” Milan voiced during his interview with The Times. “If inflation isn’t a pressing concern, I don’t see any justification for taking that risk.”
Bessent supported this perspective, asserting that the Trump administration’s spending reductions should help decrease the deficit-to-GDP ratio from 6.4% to 5.9%, which might also ease inflation. He suggested that the Fed could assist by further reducing interest rates.
“As spending diminishes, I believe inflation will also drop. And if inflation drops, the Fed should lower rates,” he commented.
