Prime Highlights:
Treasury Secretary Scott Bessent reveals the Trump administration’s emphasis on maintaining low 10-year Treasury yields instead of pressuring the Federal Reserve to cut interest rates.
Bessent clarifies that President Trump is no longer urging the Fed to lower rates, focusing instead on using fiscal policy tools like tax reform and deregulation to achieve lower rates.
Key Background:
U.S. Treasury Secretary Scott Bessent recently emphasized that the Trump administration is focused on maintaining low Treasury yields rather than directly influencing the Federal Reserve’s actions. In an interview with Fox Business, Bessent clarified that, while President Donald Trump had previously urged the Fed to reduce its benchmark rate during his first term, the administration’s current strategy is to utilize fiscal policy tools to ensure low rates. Specifically, Bessent highlighted the importance of the 10-year Treasury yield, rather than the federal funds rate controlled by the central bank.
“The president wants lower rates,” Bessent stated, emphasizing that their attention is now directed at the yield on the 10-year Treasury bond. The administration’s approach relies on fiscal measures such as deregulation, tax reform, and energy policy to achieve lower rates, with the goal that these factors will naturally support the economy without requiring Fed intervention. This marks a shift from Trump’s earlier approach, where he actively pressured the Fed to cut rates.
Bessent also pointed to the ongoing economic policy agenda, which includes making the Tax Cuts and Jobs Act permanent, reducing government spending, and pursuing energy exploration. He indicated that these efforts, combined with reducing the size and inefficiencies of government, would contribute to a favorable economic environment and naturally lower interest rates.
Market reactions to recent Fed decisions have been mixed, as Treasury yields rose despite the central bank’s rate cuts, reflecting heightened inflation expectations. However, Bessent’s comments suggest the administration’s intention to maintain a focus on Treasury yields as a key economic indicator. The 10-year Treasury yield has recently declined, moving from a January peak of 4.8% to around 4.45%, which Bessent views as a positive sign. In contrast to past tensions between Trump and the Fed, this strategy suggests a more harmonious relationship, potentially easing market uncertainties.
