US Treasury Secretary Bessent says he understand if the Fed needs to wait on rate cuts; eventually Fed will cut more
WAR
- Markets are discounting that the war will end.
FED
- Would be ready to cut rates, have an open mind to more cuts since the Fed waited longer.
- Doesn't know if Warsh will be confirmed by May 16th.
- Hopes everyone works to have Warsh at the Fed in May.
PRICES
- Notes of a downward trend in core inflation.
- Confident fertiliser prices will come down.
- Gasoline prices will start coming down quickly.
- Warns gasoline stations to be good actors on prices.
- Markets say there have been no transfers from oil prices to inflation expectations.
GROWTH
- This quarter will be slower than it was.
- Micro data points on the economy have been great.
PRIVATE CREDIT
- Keeping track of private credit.
- Wants to avoid regulatory arbitrage.
- Treasury sees no systemic risk in private credit.
CHINA
- Great stability in the China relationship.
- On track for a mid-May meeting with China.
Context
Bessent's comments suggest a cautious but open stance from the Treasury regarding Fed rate cuts, highlighting a possible delay in action due to current conditions. The emphasis on downward trends in core inflation and slowing growth indicates an evolving economic outlook, which could imply sustained pressure for the Fed to consider easing in the future. This nuanced guidance is likely to impact market expectations around rate paths and may strengthen the USD as traders re-evaluate their positions.
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