Treasury Secretary Scott Bessent on Wednesday said the Federal Reserve rate is significantly higher than necessary and should undergo several rate cuts. Photo by Bonnie Cash/UPI | License Photo
The current Federal Reserve interest rate is significantly higher than necessary and should be lowered, Treasury Secretary Scott Bessent said on Wednesday.
The Federal Reserve’s current lending rate for banks is between 4.25% and 4.5%, but Bessent said it should be between 1.5% and 1.75% lower, The Hill reported.
“We could go into a series of rate cuts here, starting with a 50 basis point rate cut in September,” Bessent told Bloomberg TV.
Such a rate cut would lower the Fed’s lending rate by a half percent, which Bessent said is just a start.
“If you look at any model, we should probably be 150 [to] 175 basis points lower,” he added. “I think the committee needs to step back.”
Bessent supports President Donald Trump’s criticism of the Federal Reserve’s decision not to lower the lending rate so far this year.
Trump has referred to Federal Reserve Chairman Jerome Powell as “too late” and said he intends to replace Powell when the chairman’s term ends next year in May.
The Federal Reserve made three rate reductions during the latter half of 2024, which Trump has said was done to make the Biden administration look better in an election year.
Powell has cited Trump’s tariff policies as the reason the Federal Reserve Board has not lowered the interest rate so far this year.
The board’s members want to see the potential effect of tariffs on inflation, which rose slightly to 2.7% in June and July from 2.4% in May.
Powell consistently has stated the Federal Reserve has an inflation target of 2% when making prior rate cuts.
The president and Bessent will have a rate-cut ally on the Federal Reserve Board if the Senate in September confirms nominee Stephen Miran.
Miran, 41, temporarily would replace Adriana Kugler, who resigned from the Board of Governors after dissenting with its recent decision to maintain the Fed’s current lending rate.
Miran would complete Kugler’s term, which runs through January. Trump has said he likely will nominate someone else as her permanent replacement.
The Federal Reserve’s Board of Governors has seven members when fully staffed.
This week in Washington
President Donald Trump announces the 48th annual Kennedy Center Honors recipients at the John F. Kennedy Center for the Performing Arts on Wednesday. Photo by Will Oliver/UPI | License Photo
