“I think we could go into a series of rate cuts here, starting with a 50 basis-point rate cut in September,” The United States Treasury Secretary Scott Bessent said on Tuesday, urging the Federal Reserve to be aggressive in line with the latest economic data.
The comments by Mr. Bessent are in line with downwardly revised labour market data indicating slackening job gains in May, June and July, and July inflation data, which remained well contained. He claimed that, should similar revisions have been possible in the past, the central bank could have given the go-ahead to lowering interest rates as early as June or July. In his opinion, economic models indicate a neutral rate of around 150 175 basis points below where they are now.
The Trump administration has been urging an aggressive easing in monetary policy to keep the wheel of economic growth. In contrast to a rise in service prices, goods prices have instead been relatively stagnant despite newer impositions of tariffs, a condition that officials perceive to bolster the argument in support of a rate cut.
The financial markets are nevertheless pessimistic. Future expectations are dominated by traders expecting a smaller 25 basis-point cut in September, with little likelihood attributed to the larger move. An oversized cut may also raise the manufacturers’ panic, especially during a period when equity valuations are high.
The rate policy debate also arises when the leadership position of the Federal Reserve is being reviewed. Stephen Miran, one of the two board members running an open term through January, could be considered in decisions thereafter should confirmation come in time. Mr. Bessent also confirmed a broad pool of 10 to 11 candidates is under review by President Donald Trump to replace Jerome Powell, whose term as Fed Chair expires in May 2026.
In the central bank, there is a division of opinion. Other regional presidents, such as Mary Daly of San Francisco, have warned that a 50 50-basis-point move will not work, but a slow-paced provision back to the neutral policy would be more suitable in the next 12 months.
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