Treasury secretary says central bank could still move rates lower despite its current pause
The US Federal Reserve could implement one or two interest rate cuts before the end of the year, according to Treasury secretary Scott Bessent. Speaking at a Washington AI forum, Bessent described a weakening inflation outlook, suggesting that tariffs were not a sustained price threat and should not deter monetary easing.
Bessent said he regularly communicates with Fed chair Jerome Powell to argue that tariff-related price increases are “a one-time shift” rather than a persistent inflation driver, and dismissed critiques of the administration’s trade stance as “tariff derangement syndrome.”
Fed officials show growing support for cuts
Bessent’s outlook is shared by some inside the Federal Open Market Committee. Fed governor Chris Waller and vice chair for supervision Michelle Bowman—both Trump appointees—have publicly backed a rate cut at the Fed’s July 30 meeting. Reuters reported that Waller, whose term extends to May 2026, has also indicated a willingness to succeed Powell if asked.
Still, most committee members favor holding rates steady for now. According to a Reuters poll of 105 economists, all respondents expect the Fed to maintain its key interest rate at 4.25%–4.50% this month. A narrow majority (53%) predict a rate cut by September, though views diverge beyond that point.
Inflation, tariffs, and uncertainty
Trade policy remains a critical variable. Trump’s latest wave of so-called “reciprocal” tariffs, expected to take effect August 1, have heightened economic uncertainty. While Bessent highlighted the benefits of tariffs in terms of domestic job creation and industrial activity, economists are less certain about the net impact.
“Tariffs could affect things both in terms of higher inflation (and) it could slow the economy,” said Jonathan Millar, senior US economist at Barclays. “The Fed doesn’t know exactly what that mix is going to be and that’s reason enough to wait.”
While nearly two-thirds of surveyed economists expect one or two rate cuts this year, close to one-fifth foresee no cuts at all. Inflation projections remain above the Fed’s 2% target through 2027, further complicated by the recent passage of a $3.4 trillion federal spending bill.
Concerns over Fed independence rise
Beyond the policy debate, the central bank’s independence is facing mounting scrutiny. More than 70% of economists polled by Reuters said they are concerned about political interference in Fed decisions. Analysts cited Trump’s repeated attacks on Powell as a major factor.
“I’m more worried about the Fed’s independence than I was a few months ago,” Philip Marey, senior US strategist at Rabobank, told Reuters. “The main reason for that is the recent behavior of Governors Bowman and Waller. It’s very notable they are diverging from the consensus.”
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