US Treasury Secretary Scott Bessent made his most explicit call yet for the Federal Reserve to execute a cycle of interest-rate cuts, suggesting the central bank’s benchmark ought to be at least 1.5 percentage points lower than it is now.
“I think we could go into a series of rate cuts here, starting with a 50 basis-point rate cut in September,” Bessent said in a television interview on Bloomberg Surveillance Wednesday. “If you look at any model” it suggests that “we should probably be 150, 175 basis points lower.”
Fed policymakers last month kept their benchmark at a target range of 4.25% to 4.5%, where it’s been all year. Bessent said officials might have cut rates if they’d been aware of the revised data on the labor market that came out a couple of days after the latest meeting. The Bureau of Labor Statistics on Aug. 1 slashed the numbers for payroll gains in May and June by 258,000.
“I suspect we could have had rate cuts in June and July,” Bessent said.
Bessent’s suggestion for rate cuts exceeds what’s indicated in the bond market. One and a half percentage point of cuts would take the midpoint of the Fed’s target range to 2.88%. Interest-rate futures reflect bets on the Fed lowering its benchmark to 3% in September or October next year. Two-year Treasury yields remain well above, at 3.68%.
Treasury secretaries have typically shied away from making specific calls on Fed rates, and Bessent has said for months he would only discuss the central bank’s past policy decisions — not their upcoming ones. President Donald Trump has repeatedly criticized Chair Jerome Powell for refraining from rate cuts this year. Powell and many colleagues have said they want to see more evidence about the inflationary impact of Trump’s tariff hikes.
