Bessent: Does not understand why Powell is "backing down," urges a 100-150 basis point rate cut by the end of the year, currently interviewing 11 candidates for chairman

Bessent was "somewhat surprised" that Powell failed to signal at least a 100 to 150 basis point rate cut by the end of the year.

Written by: Zhang Yaqi

Source: Wallstreetcn

U.S. Treasury Secretary Bessent has rarely publicly expressed dissatisfaction with Federal Reserve Chairman Powell, criticizing him for failing to establish a clear agenda for rate cuts, highlighting the growing divergence between the U.S. government and the Federal Reserve on the path of monetary policy.

In a media interview on Wednesday, Bessent stated that the current interest rates are "overly restrictive and need to be lowered." He pointed out that he was "somewhat surprised" that Powell failed to signal at least a 100 to 150 basis point rate cut by the end of the year.

Bessent's remarks stand in stark contrast to Powell's cautious stance the previous day. On Tuesday, during an event in Rhode Island, Powell reiterated that the Federal Reserve is facing a "challenging situation" with both a weakening labor market and rising inflation risks. He emphasized that the two-way risks mean there is "no risk-free path," implying his cautious attitude toward further policy easing.

This public policy disagreement comes at a delicate moment when the White House is searching for Powell's successor. Bessent revealed that he is interviewing 11 candidates to replace Powell, and he is looking for an open-minded person to serve as Federal Reserve Chair.

Dissenting Voices from the New Governor

While criticizing Powell, Bessent highly praised the newly appointed Federal Reserve Governor Milan, saying he has injected "fresh blood" into the Board. Nominated by President Trump and approved by the Senate before last week's Federal Reserve meeting, Milan is an advocate of aggressive rate cuts.

According to reports, at the Federal Reserve's most recent meeting where a 25 basis point rate cut was decided, Milan voted against it, preferring a 50 basis point cut. Bessent commented:

"Milan has said more in a week than the governors appointed by the Biden administration have said in their entire terms."

As the key person responsible for selecting candidates, Bessent stated that he is interviewing 11 candidates.

Bessent revealed in an interview, "There will be many more interviews next week." He is looking for an open-minded person to serve as Federal Reserve Chair.

Powell's Cautious Stance

When weighing future decisions, Powell is striving to balance two opposing economic risks. According to his speech at the Providence Chamber of Commerce, policymakers must simultaneously address the dual threats of a declining job market and rising inflation.

Powell pointed out, "The short-term risk of inflation is tilted to the upside, while the risk to employment is tilted to the downside." This dilemma explains why he remains cautious about rapid rate cuts and avoids making explicit commitments about the future policy path. In his view, any decision carries risks, and acting rashly could undermine hard-won price stability or further impact the already weakening job market.