U.S. Treasury Secretary Pressures Powell to Cut Rates: "Key Rate Higher Than 2-Year Yield"

Besant's Interview with Fox News
"Market Believes the Fed Should Cut Rates"

U.S. Treasury Secretary Scott Besant has urged the Federal Reserve (Fed) to cut interest rates ahead of next week's key rate decision. This call for a rate cut from Besant, the nation's chief economic policymaker, comes after President Donald Trump has repeatedly pressured Fed Chair Jerome Powell to lower rates.

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In an interview with Fox News on the 1st (local time), Secretary Besant stated, "The yield on the 2-year U.S. Treasury note is currently lower than the federal funds rate," adding, "This is a signal that the market believes the Fed should cut rates."

The yield on the 2-year U.S. Treasury note is highly sensitive to the Fed's monetary policy. As of 9:29 a.m. Eastern Time on this day, the yield on the 2-year Treasury was 3.56%, significantly below the Fed's current target range of 4.25% to 4.5%. Based on this, Besant argues that the Fed should lower rates to a level the market deems appropriate. Until now, Secretary Besant has repeatedly emphasized the Fed's independence and stated his intention to focus on the decline in the 10-year Treasury yield, a global bond benchmark. However, he has now publicly called on the Fed to cut rates.

Secretary Besant's remarks come amid growing concerns about an economic slowdown due to President Donald Trump's tariff policies. According to the U.S. Department of Commerce the previous day, first-quarter gross domestic product (GDP) growth was calculated at an annualized rate of -0.3% compared to the previous quarter. This marks the first negative growth in three years since the first quarter of 2022 (-1.0%), when the economy was severely impacted by the COVID-19 pandemic. The negative growth was attributed to companies stockpiling imports ahead of the implementation of tariffs, as well as a decrease in government spending.

However, the market expects the Fed to keep its key rate unchanged at the upcoming Federal Open Market Committee (FOMC) meeting on the 7th. According to the CME FedWatch tool, the interest rate futures market is reflecting a 95.6% probability that the Fed will hold rates steady in May.