According to a Bloomberg report, Scott Bessent stated that the central bank should be open to a 50 basis point rate cut after omitting a measure in its last monetary policy meeting. He made these remarks shortly after the release of July's inflation data, which he described as 'incredible.'
The latest consumer price index (CPI) showed a 0.2% increase compared to the previous month. Core inflation, which excludes food and energy, rose by 0.3%, in line with economists' expectations.
While service costs increased, the prices of goods remained more contained despite the recent tariff increases by President Donald Trump. Bessent pointed to these figures as evidence that the Federal Reserve has room to act more decisively on monetary policy. This could include a rate cut.
He also expressed optimism that Stephen Miran, nominated by Trump for the vacant position on the Federal Reserve board, would be confirmed before the monetary policy meeting on September 16 and 17. Miran currently chairs the White House Council of Economic Advisers.
If approved, it would occupy a term extending until January. Bessent noted that Miran could remain longer. In addition to discussing a rate cut, the Treasury Secretary also addressed the search for a new Federal Reserve chairman, as Jerome Powell's term ends in May.
He said that Trump is considering a wide range of candidates and emphasized three main qualities for the position: a solid vision of monetary policy, a clear approach to regulatory policy, and the ability to manage and reform the Fed as an organization. He argued that the central bank has become too large over time, jeopardizing its independence.
Trump has repeatedly criticized Powell for not implementing any rate cuts this year. Additionally, Federal Reserve officials have requested more evidence on the inflationary impact of the tariff increases.
Bessent's comments suggest that the administration would favor a faster and more substantial reduction in rates to boost economic growth. The pressure for a half-point cut arises at a time when economic policymakers are assessing how to balance controlling inflation with maintaining economic dynamism.
The upcoming September meeting is likely to be closely watched for signs of whether the Fed will follow Bessent's recommendation to cut the interest rate.
