The administration has, until now, been consistently (and I think unwisely) pushing for steep cuts in the interest rates that the Federal Reserve most influences. Now Treasury Secretary Scott Bessent is sounding a different note. From Semafor:
“Do I think rates should be lowered? Eventually. I think now that we have to wait and see,” Bessent told Semafor Editor-in-Chief Ben Smith. “But I think as we went into January [and] came out of January and February — the economy was very strong.”
US President Donald Trump has spent much of his second administration lobbying for the central bank to slash interest rates. For now, the Fed is “doing the right thing by sitting and watching” how the Iran conflict plays out, Bessent said.
I’d rather the Fed look at the growth rate of spending throughout the economy, and not at the Iran conflict. That conflict is having and will have effects on total output that the Fed cannot and should not try to counteract. (If it raises expected spending levels — because, say, markets decide that the Fed will react to it by being overly accommodative, as it did to the oil shocks of the 1970s — then the Fed can and should signal it won’t let that happen.)
But the bottom-line advice not to cut rates right now seems correct.