Besant Calls for "Big Cut" in September
Suggests Fed Should Lower Rates by Up to 1.75 Percentage Points
On August 13 (local time), U.S. Treasury Secretary Scott Besant argued that the Federal Reserve (Fed) should begin a "big cut" of 0.5 percentage points in September and ultimately lower interest rates by up to 1.75 percentage points.
In an interview with Bloomberg TV that day, Secretary Besant stated, "I believe a series of rate cuts could follow, starting with a 50 basis point (1bp = 0.01 percentage point) reduction in September," adding, "Whichever model you look at, rates probably need to be lowered by 150 to 175 basis points."
This means he is calling for the current benchmark interest rate of 4.25% to 4.5% to be reduced to a range of 2.5% to 2.75%.
He reaffirmed his previous stance that the Fed would have cut rates if it had known in advance about the weak employment data released two days after the Federal Open Market Committee (FOMC) regular meeting on July 30. He further emphasized, "It is possible that rates could have been cut both in June and July."
Previously, on August 1, the Bureau of Labor Statistics (BLS) under the U.S. Department of Labor released the July employment report, significantly revising down the employment figures for May and June. As the labor market contracts, Secretary Besant observed that the Fed would likely have prioritized responding to economic slowdown risks over curbing inflation by lowering rates. He also urged a big cut in September during a Fox News interview the previous day.
Although Secretary Besant has previously compared the Fed's monetary policy independence to a "jewel box" and stated he would refrain from commenting on future policy decisions, he is now openly expressing his specific views on the future path of interest rates.
He also revealed that he is reviewing a list of 10 to 11 candidates, including current Fed board members and private sector figures, as potential successors to Jerome Powell, whose term as Fed Chair expires in May 2026. However, he did not disclose the specific names.
In addition, he stated that Steven Miran, who has been nominated to succeed former Fed Governor Adriana Kugler, will serve only until the end of the remaining term, which is January of next year.
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
