He sees market thawing soon and inflation easing under new policies
Treasury secretary Scott Bessent expects the US housing market to rebound in the coming weeks, despite weak data in recent months, and believes inflation could return to the Federal Reserve’s 2% target sooner than anticipated.
“We’re still living through this Bidenflation,” Bessent said Friday in an interview with Bloomberg Television, echoing the Trump administration’s stance that economic policies under former President Joe Biden contributed to rising consumer prices.
“Over the next six to 12 months, as we deregulate, drill more American energy” and bring certainty to extending the 2017 tax cuts, “we could very quickly go back to the Federal Reserve target of 2%,” Bessent said.
The latest inflation data showed core personal consumption expenditures (PCE) rising 2.6% year-over-year in January, the highest in three months. The University of Michigan’s February survey found that consumers expect inflation to average 3.5% annually over the next five to 10 years.
Concerns remain that inflation could stay elevated, especially as Trump moves forward with tariff increases on US trading partners, which could push up costs further.
Read more: Consumer confidence plunges as inflation fears rise to multi-decade high
Fannie Mae’s Economic and Strategic Research (ESR) Group revised its mortgage rate projections upward, now expecting rates to end 2025 at 6.6% and 2026 at 6.5%. Persistent inflation risks and trade policy uncertainties are likely to keep rates fluctuating.
The yield on 10-year Treasury securities, a key benchmark for mortgage rates, is currently around 4.2%, well above its 10-year average of 2.5%. This has contributed to 30-year fixed mortgage rates remaining above 6%, creating affordability challenges for buyers.
Fannie’s ESR group did not change its GDP forecast of 2.2% for 2025, but it increased its consumer price index (CPI) projection from 2.5% to 2.8% due to higher-than-expected price hikes.
Bessent also addressed the federal deficit, which is projected to remain above 6% of GDP for years. He reiterated that the administration is focused on deficit reduction and sees tariffs as a potential revenue source over the next decade.
“We’re determined to get this down,” he said of the deficit. Trump, he added, has inquired about when the federal budget could be balanced, though no firm timeline was provided.
He also suggested that federal spending cuts may be coming.
“I’m slightly shocked at some of the fraud we’re finding,” he said, hinting that more revelations would emerge in the coming weeks.
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