Bessent Pressures Fed for Deep Rate Cuts as Powell Holds Back
The debate over how far the Federal Reserve should go with rate cuts is intensifying, with U.S. Treasury Secretary Scott Bessent taking direct aim at Jerome Powell’s cautious approach.
Bessent insists borrowing costs are overly restrictive and argues the central bank is already behind the curve in responding to economic weakness.
His call is for a dramatic shift — reductions of up to 150 basis points by the end of the year. The Treasury chief points to signs of a softer labor market, noting that job revisions suggest employment strength is overstated. In his view, waiting risks tipping the economy into deeper trouble.
Powell, however, continues to tread carefully. Speaking earlier this week, the Fed Chair highlighted a delicate balancing act: inflation has shown renewed upward momentum, even as hiring slows. Cutting rates too quickly, he warned, might fuel another wave of price pressures and force policymakers to reverse course.
That hesitancy rattled markets. Bitcoin sank to near $111,200 overnight, reflecting broader risk-off sentiment after investors had initially cheered last week’s rate cut. The optimism has since faded, with traders treating it as a temporary boost rather than the beginning of a sustained easing cycle.
Even so, futures markets are pricing in more action from the Fed. Expectations now lean toward two additional quarter-point moves, one in October and another in December, bringing total cuts this year to 50 basis points. Probabilities from CME FedWatch put the odds above 90% for an October move and more than 70% for a second step by year-end.
Still, not every Fed official is on board. Raphael Bostic has signaled there’s no urgent need for further easing, while Alberto Musalem has tied his support to worsening conditions in the labor market. With opinions divided, Friday’s release of the Fed’s preferred inflation metric — the PCE index — is shaping up as a pivotal moment that could determine the next policy move.
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