Treasury Secretary Scott Bessent on Tuesday expressed confidence that inflation will moderate through the year, giving the Federal Reserve room to cut interest rates.
Bessent added, though, that he understands if central bank policymakers take a cautious approach until impacts from the Iran war become clearer.
“I am highly confident that the core inflation … which is quite under control and actually dropping in many categories, will continue to go down,” he told reporters at the Semafor World Economy Conference in Washington, D.C.
“I believe rates should be cut,” he added, “but that if they want to wait for some clarity, I understand that.”
The comments come as recent data showed consumer prices rose 0.9% and producer prices up 0.5% in March, with much of those gains coming from soaring energy costs since the Iran war began in late February.
However, core inflation has been considerably tamer — posting gains of 0.2% on the consumer side and just 0.1% on the wholesale side, according to Bureau of Labor Statistics data.
Bessent noted that Treasury yields have been declining, reflecting lowered inflation expectations as a ceasefire has led to a sharp drop in oil.
In earlier remarks at the conference, Bessent also said he understood the Fed’s caution.
“Do I think rates should be lowered? Eventually. I think now that we have to wait and see,” Bessent said Monday during a stage interview.
Bessent has previously said that Fed Chair Jerome Powell should hasten cutting interest rates, saying in January that reductions are “the only ingredient missing for even stronger economic growth. Which is why the Fed should not delay.”
Elevated price levels complicate the Fed’s mandate, as it eyes rising inflation alongside slowing growth. The central bank was last expected to hold rates steady this year, with the slimmest possibility of a hike, according to fed funds futures pricing.
Coming out of “January and February — the economy was very strong,” Bessent told Semafor.
Powell’s term as chair is up in May, but he could have to stay on longer if Trump’s chair nominee which Bessent helped select, Kevin Warsh, can’t get confirmed by the Senate by the time. Sen. Thom Tillis, R-N.C., has vowed to block a Warsh vote until U.S. Attorney Jeanine Pirro ends her criminal probe into Powell related to Fed building cost overruns. Powell has said the investigation is designed to put pressure on him by the Trump administration for not cutting rates more.
See the full Semafor story here.
— CNBC’s Matt Peterson contributed reporting.
