In an interview with Bloomberg on 13/8, US Treasury Secretary Scott Bessent predicted, "I think we're about to enter a period of consecutive interest rate cuts, starting with 50 basis points (0.5%) this September".
He also assessed that the current interest rate is "too tight" and should be reduced by a further 150-175 basis points (1.5-1.75%). The Federal Reserve (Fed) has maintained its benchmark interest rate around 4.25-4.5% this year.
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US Treasury Secretary Scott Bessent at Capitol Hill on 24/6. Photo: AP |
US Treasury Secretary Scott Bessent at Capitol Hill on 24/6. Photo: AP
Bessent noted that last year, the Fed cited a weak labor market to justify a 50 basis point (0.5%) rate cut in its September meeting. At that time, the US unemployment rate had increased by 0.75 percentage points within a year. Currently, the unemployment figures haven't changed significantly. However, job growth has declined.
According to the latest adjusted data from the US Bureau of Labor Statistics, job growth in May, June, and July was weak. This contrasts with the initial estimates the Fed relied on for its interest rate decisions. "If these figures had been available in May and June, I believe the Fed would have acted in its June and July meetings", Bessent predicted.
Next week, Fed Chair Jerome Powell will deliver a speech at the Fed's annual symposium in Jackson Hole, Wyoming. Last year, he also hinted at rate cuts at this forum, pledging to "do whatever we can to support the labor market and stabilize prices".
In 2024, the Fed cut interest rates three times, totaling 100 basis points. However, the Fed has not yet adjusted its monetary policy this year. This week, the latest data showed US inflation rising slower than expected in July, reinforcing the likelihood of a September rate cut.
CME's FedWatch Tool also shows that investors are currently predicting a 99.9% probability of a 25 basis point (0.25%) rate cut at the 16-17/9 meeting.
Goldman Sachs expects the Fed to cut interest rates three times this year, by 25 basis points each time. Next year, the Fed could make two more adjustments, bringing the interest rate down to 3-3.25%.
Ha Thu (Reuters)
