Bessent hints Fed should be open to a half-point rate cut

Business Times

10 hours ago

[WASHINGTON] Treasury Secretary Scott Bessent suggested that the Federal Reserve ought to be open to a bigger, 50 basis-point cut in the benchmark interest rate next month, after having skipped a move at the last meeting.
'The real thing now to think about is should we get a 50 basis-point rate cut in September,' Bessent said in an interview on Fox Business on Tuesday (Aug 12). He highlighted how, two days after the Fed left rates unchanged July 30, revised data showed weaker job growth for May and June than official figures had previously indicated.
The Fed 'could have been cutting in June, July' had it had the revised figures in hand at the time, Bessent said. He was speaking hours after the latest inflation report, which he said showcased that economists had misread the likely effect of tariffs.
The consumer price index rose 0.2 per cent from the previous month, while the core gauge, excluding food and energy costs, matched economists' expectations with a 0.3 per cent rise. While services inflation picked up, goods prices were more subdued, despite President Donald Trump's tariff hikes.
'Everyone was expecting that there would – as you just said – that there would be goods inflation, but there was actually this very odd service inflation,' Bessent said.
Bessent also said he was 'hopeful' that Trump's pick for the currently open position on the Fed board, Stephen Miran, will be in place in time for the Sept 16-17 policy meeting. He noted that Miran, the head of the White House Council of Economic Advisers, needs to be confirmed by the Senate.
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Miran was tapped to fill a board seat that runs to January. Bessent said it's possible that he could be asked to 'stay on' for a further term. Full Fed board terms are 14 years.
'He is going to be a great voice,' Bessent said of Miran. 'It is going to change the composition of the Fed.'
As for the nominee to succeed Fed Chair Jerome Powell, whose time at the helm expires in May, Bessent said that there's a 'very wide net' being cast, and that Trump has a 'very open mind.'
The Treasury chief cited three criteria for the pick for chair – the person's views on monetary policy, regulatory policy and an ability to run and revamp the central bank as an organisation. The Fed 'got bloated' over the time, and that has put its independence over monetary policy at risk, Bessent said.
In a barb at the costs of the Fed's renovation project of its Washington headquarters, Bessent said that he is redoing his own office at his own expense. The Fed's two-building rehabilitation has drawn significant attacks from Republicans over its US$2.5 billion price tag.
'I'm renovating my office at Treasury, and I'm paying for it personally,' Bessent said.
Trump has blasted Powell over the building renovation, adding to his regular criticism about the Fed chief failing to oversee a rate cut this year. Powell and many of his colleagues have said they want to see greater evidence about any impact on inflation and inflation expectations from the tariff hikes.
Turning to the ongoing trade negotiations, Bessent floated as an aspirational target to have much of those talks completed over coming months.
'We are in a good position,' he said. 'We will have agreed on substantial terms with all the substantial countries.'
Bessent also hailed the investment commitments that companies and other nations have been making since Trump returned to the White House.
'In terms of the committed investment by private industry, we're well over US$10 trillion,' he said. BLOOMBERG