U.S. Treasury Secretary Benson confirmed that she did not request the Federal Reserve (Fed) to cut interest rates consecutively.

MAIN CONTENT

  • Benson does not direct the Fed to cut interest rates; she merely comments according to the model that the neutral interest rate is lower than the current one.

  • He does not call for rate cuts, but only analyzes the position of the neutral interest rate.

Does the U.S. Treasury Secretary request the Fed to cut interest rates?

U.S. Treasury Secretary, Ms. Benson, affirmed that she is not requesting the Fed to conduct consecutive rate cuts.

Instead, she shares analysis from economic models showing that the neutral interest rate is currently up to 1.5 percentage points lower. This understanding does not mean she is urging the Fed to cut interest rates but is merely assessing the theoretical equilibrium level.

What is the significance of the neutral interest rate in Benson's statement?

The neutral interest rate is the theoretical interest rate that keeps the economy neither too hot nor too cold, not putting pressure on growth or inflation.

According to Ms. Benson, economic models show that the neutral interest rate is approximately 150 basis points lower than the rate currently applied by the Fed. This provides a basis to speculate that there is room for rate cuts in the future if conditions are suitable.

"I am not telling the Fed what to do. What I am saying is that to bring interest rates to a neutral level, about 150 basis points need to be cut. If one believes in the neutral interest rate, there may be room for rate cuts, but I am not calling for that."

Ms. Benson, U.S. Treasury Secretary, on August 14, 2024

How does Benson explain her previous statement regarding the Fed potentially starting to cut interest rates?

Benson previously stated that the Fed could initiate a series of rate cuts, but the depth of her statement was later clarified not to be directive of policy.

She emphasized that this is a statement based on data and economic models regarding the neutral interest rate, not any political pressure or specific requests to the Fed. This reflects a cautious approach to monetary policy in the current economic context.

Analysis of the impact of this statement on financial markets

The information that the Treasury Secretary does not request a rate cut helps reassure investors amid rumors of early easing policy. Affirming that the neutral interest rate is lower than the current one does not imply an immediate change.

The possibility of interest rate cuts depends on various economic factors such as inflation and growth, with Ms. Benson's statement primarily being an academic observation, increasing transparency for U.S. monetary policy.

Frequently Asked Questions

Does the U.S. Treasury Secretary request the Fed to cut interest rates or not?

No, Ms. Benson affirmed that she did not call for the Fed to cut interest rates, but only commented on the lower neutral interest rate.

"What is the neutral interest rate?"

The neutral interest rate is the interest rate that helps balance the economy, not excessively promoting or restricting growth.

How does Benson's statement affect the market?

Helps stabilize investor sentiment without putting pressure on the Fed to cut interest rates immediately.

How many basis points need to be reduced to reach the neutral interest rate?

About 150 basis points (1.5%) reduction is needed according to the economic model of the U.S. Treasury Secretary.

On what basis is Benson's statement made?

Based on the analysis of economic models regarding the neutral interest rate, it is not a policy recommendation.

Source: https://tintucbitcoin.com/fed-bessant-chi-trinh-bay-mo-hinh/

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