US Treasury secretary points to housing recession, calls for faster Fed rate cuts
United States Treasury secretary Scott Bessent called out the Federal Reserve’s high interest rate policy for pushing the US housing market into recession, warning that “there are sectors of the economy that are in recession” despite broader economic stability.
Bessent said the housing sector has borne the brunt of the Fed’s tightening cycle, with high mortgage rates sidelining buyers and cooling activity.
“Housing is effectively in a recession that is hitting low-end consumers the hardest because they have debts, not assets,” Bessent said on CNN’s “State of the Union.”
He argued that if the Fed “brings down mortgage rates, they can end this housing recession.”
Pending home sales in the US rose 4.0% in August from July and 3.8% from a year ago, according to a report released Monday by the National Association of Realtors (NAR).
Policy divide at the Fed
The Treasury secretary’s comments followed a week of mixed signals from the Federal Reserve. Chair Jerome Powell signaled a pause on further rate cuts at the December meeting, drawing criticism from Bessent and other Trump administration officials.
Federal Reserve governor Stephen Miran, in a New York Times interview, warned that “if you keep policy this tight for a long period of time, then you run the risk that monetary policy itself is inducing a recession.”
Miran, who dissented from the Fed’s recent decision to lower rates by only 25 basis points, advocated for a deeper 50 basis point cut, citing limited inflation risks.
Meanwhile, even if the Fed holds in December, other factors like a continuing shutdown or further weakness in the job market may push rates lower anyway.
“I would say that if the news continues to show that the employment sector remains weak, and that if we see that tariff pressures are eased, like what's going on with China, I think the mortgage rates will settle back down,” Melissa Cohn, regional vice president of William Raveis Mortgage, told Mortgage Professional America.
“The markets always tend to be very reactionary. And I think without any concrete data to support a move one way or the other, that the moves can be exaggerated.”
Broader economic transition
Bessent framed the current environment as a “transition period,” attributing high inflation to pandemic-era government spending, which he said the Trump administration is now reining in.
“If we are contracting spending, then I would think inflation would be dropping. If inflation is dropping, then the Fed should be cutting rates,” Bessent said.
He pointed to a drop in the deficit-to-GDP ratio from 6.4% to 5.9% as evidence of fiscal discipline, though this figure could not be independently verified at press time.
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