Treasury Secretary Scott Bessent expressed on Wednesday that short-term interest rates could be about 1.5 to 1.75 percentage points lower than they currently stand. He also emphasized the need for the administration to keep up its pressure on the Federal Reserve.
Bessent advocates for a half-point cut during the next Federal Reserve meeting in September, aiming for a series of reductions to bring the existing rate of 4.25 to 4.5% down significantly.
“We could initiate a series of rate cuts, starting with a 50 basis point reduction in September,” he remarked in an interview with Bloomberg News Television. “It should really be around 150 to 175 basis points lower. I believe the committee needs to step back.”
While Bessent’s comments specifically addressed short-term interest rates, he noted that as the Treasury Secretary—who oversees debt issuance and tax collection—he shouldn’t directly influence monetary policy, which is typically the Fed’s domain.
Bessent referred to the Fed’s independence in monetary policy as a “jewel box” but has also echoed President Trump’s criticisms regarding the bank’s approach to interest rates.
Since the start of the year, Trump has been pushing for rate cuts, expressing frustration over the Fed’s slow response to rising prices and calling out Fed Chairman Jerome Powell for being “too late” with adjustments.
The Fed has kept its interbank lending rate at roughly 4.33% since January, following three cuts made in the latter half of last year. They’ve been closely monitoring the effects of tariffs on the economy.
After peaking at 2.4% in May, the Consumer Price Index (CPI) has steadied with a 2.7% increase from June to July.
The job market has noticeably slowed down over the past three months, with only 106,000 jobs added between May and July.
When asked on Wednesday whether a half-percent cut in September would suggest a weakening economy, Bessent indicated that it would signal a necessary adjustment.
“It shows that there’s a realignment and that rates are perhaps dropping too quickly,” he stated.
Powell has recently asserted that he views current rates as “conservatively restrictive,” implying that inflation-adjusted rates might hinder profitability and lower investment levels.
Bessent criticized Powell’s approach, implying that his reliance on data might not be as effective. “He’s not Alan Greenspan, who was more forward-thinking. The current strategy feels outdated to me,” Bessent argued. “They’re trying to be overly data-driven, and I think that’s a mistake.”
