Trump admin again pokes the Federal Reserve, Scott Bessent says it's time for Jerome Powell to cut rates

The Trump administration is again putting pressure on the Federal Reserve, this time pointing at bond market signals as the reason to reduce interest rates, as per a report. Treasury Secretary Scott Bessent, following the increasing frustration of US president Donald Trump with the central bank, claims that it's time Fed Chair Jerome Powell took action.

Trump Administration Pushes for Interest Rate Cuts

In a Fox Business interview, Bessent said, "We are seeing that two-year rates are now below fed funds rates," as quoted by Business Insider. He also said, "That's a market signal that they think the Fed should be cutting," as quoted in the report.

Through Thursday, the two-year Treasury yield was 3.56%, significantly lower than the effective federal funds rate of 4.33%, which has held since February, as per Business Insider.

According to the report, the Trump administration has focused on interest rates because it wants to bring down borrowing costs for consumers.

Donald Trump’s Persistent Criticism of Jerome Powell

While, the US president has continued to criticize Powell, saying, "I think I understand interest a lot better than him because I've had to really use interest rates. We should have interest rates go down," as quoted in the report.

Fed Policy Meeting Soon

The Fed's next policy meeting will take place on May 7, and few investors are predicting a pivot on the interest rate outlook, as per Business Insider. As per the CME FedWatch Tool, markets predict that June would be the earliest date for a possible rate cut, according to the report.

Eyes on the 10-Year Yield

Bessent pointed out that he and Trump closely monitor the 10-year Treasury yield to gauge the health of the economy, as per Business Insider. According to him, in early April, when the yield spiked aggressively it was because of Wall Street institutions de-leveraging their Treasury positions, reported Business Insider.

He said, "It just turned out that it was some overleveraged market players," adding, "Now we're continuing on the downward path, and I think our policies are going to bring down inflation," quoted Business Insider.

FAQs

Why is the Trump administration pushing for lower interest rates?
They believe it will reduce borrowing costs for consumers and boost the economy.

Who sets the fed funds rate?
The Federal Reserve, led by Jerome Powell.