Bessent Explains the Trump Is Not Demanding Rate Cuts Now
We got some powerful support this week for our argument that President Donald Trump is not demanding that the Federal Reserve cut interest rates.
Treasury Secretary Scott Bessent was interviewed this week by Fox Business Network’s Larry Kudlow. He argued that the administration is not only not pushing for a cut from the Fed but is not really focused on Fed monetary policy at all. Instead, the administration believes that its fiscal and regulatory policies will reduce longer term interest rates that directly affect things like mortgages, auto loans, and credit card rates.
“He is not calling for the Fed to lower rates,” Bessent told Kudlow. “If we deregulate the economy, if we get this tax bill done, if we get energy down, then rates will take care of themselves and the dollar will take care of itself.”
Bessent said that he and Trump are focused on the 10-year Treasury yield instead of the overnight interbank rate the Fed targets. He pointed out that after the Fed enacted its super-sized 75 basis point cut in September, yields on 10-year Treasury moved up. This was largely because investors began to reevaluate how short-term low rates would eventually be able to go given the persistence of inflation. It also likely signaled the market’s view that the end of the Biden administration cuts were likely a mistake because the labor market was stronger than it looked last summer when things briefly went wobbly.
On Thursday, Bessent appeared on Bloomberg TV and reiterated the message. “We are not focused on whether the Fed is going to cut,” he said.
As we pointed out last week, when the Fed decided not to cut interest rates last week, Trump did not criticize the decision. Instead, he took to his social media accounts to blast the Fed for having let inflation get out of control during the Biden administration. When asked about the Fed’s decision over the weekend, Trump said that he expected the Fed to hold rates steady.
“I’m not surprised,” Trump told reporters Sunday night. “I think holding the rates at this point was the right thing to do.”
Growing the Real Economy Will Bring Down Long Term Rates
Bessent and Trump realize that inflation was the undoing of the Biden administration and premature cuts from the Fed now could cause a resurgence in inflation and could put public support for the Trump presidency at risk.
Trump has actually been somewhat restrained in his criticism of the Fed. He could easily have pointed out that the Fed raised interest rates seven times during his first term as president even though inflation remained below the Fed’s target. Eventually, the Fed reversed course and began cutting in 2019, more or less an admission that it had been too hawkish. Then, when Joe Biden rammed through his reckless spending plans, the Fed remained on the sidelines, keeping interest rates ultralow, a decision which contributed to the worst inflation in 40 years. At the end of Biden’s term, despite inflation proving sticky and unemployment extremely low, the Fed started cutting again—and only hit pause when Trump came into office.
That looks to us an awful lot like a politicized Fed that finds reasons to be dovish when a Democrat is in office and reasons to be hawkish when Trump is in the White House. But Trump has so far held back from publicly pointing this out.
Wisely, Trump and Bessent are more focused on the real economy than monetary policy. Bessent has explained that the administration believes its 3-3-3 plan can deliver results that will matter for Main Street: three percent real GDP growth, cutting the deficit to three percent of GDP (down from over 6 percent today), and increasing U.S. oil production by three million barrels a day.
The administration is betting that lower energy prices will be a key weapon against inflation. Consumers’ expectations about inflation—and their overall confidence—are closely tied to what they’re paying at the pump. “So, if we can get gasoline back down, heating oil back down, then those consumers not only will be saving money, but their optimism for the future will allow them to rebuild their lives,” Bessent told Kudlow.
The post Breitbart Business Digest: Scott Bessent Explains Trump’s Interest Rate Policy appeared first on Breitbart.
