Bessent’s Mixed Messages on Rates

Treasury Secretary Scott Bessent said on April 14 that the Federal Reserve could wait on rate cuts because of war uncertainty, even as he said falling core inflation would eventually force cuts. (politico.com) (reuters.com) In remarks reported Tuesday, Bessent said he was “quite confident” core inflation would keep coming down in the United States despite the Iran war, and he repeated his call for lower rates. He also said he could understand if central bankers wanted to watch war-related economic data before moving. (reuters.com) (cnbc.com) Politico reported the same day that Bessent’s comments suggested the administration did not expect Federal Reserve Chair Jerome Powell to cut rates before Powell’s term ends in mid-May. Politico also reported that Bessent argued Kevin Warsh, President Donald Trump’s pick to succeed Powell, should set rate policy for the rest of 2026. (politico.com) The split message lands after a hotter March inflation report. The Bureau of Labor Statistics said on April 10 that consumer prices rose 0.9 percent in March and 3.3 percent from a year earlier, while core inflation rose 0.2 percent on the month and 2.6 percent over 12 months. (bls.gov) (cnbc.com) That distinction is the center of Bessent’s argument. Headline inflation includes volatile items like gasoline, while core inflation strips out food and energy, and Bessent said any war-driven jump in oil prices should fade after the conflict ends. (reuters.com) (bls.gov) The Federal Reserve itself took a more cautious line in March. After its March 18 meeting, the Federal Open Market Committee kept rates unchanged, said inflation remained “somewhat elevated,” and said the economic effects of developments in the Middle East were uncertain. (federalreserve.gov) That leaves Bessent arguing two timelines at once: wait for more clarity now, then cut later if core inflation keeps easing. Reuters reported that he tied that later path to declining underlying price pressures, while Politico reported that he linked the near-term pause to Powell’s remaining weeks in office and Warsh’s expected arrival. (reuters.com) (politico.com) Powell’s current term as chair runs into mid-May, according to Politico’s report, so the next few weeks will test whether the White House keeps pressing for cuts or keeps emphasizing patience. For now, Bessent’s public line is that inflation is cooling underneath the surface, but not fast enough to rule out a wait-and-see Fed. (politico.com) (reuters.com)