Bessent: Fed to decide on rates, Powell replacement discussions in fall
US Treasury Secretary Scott Bessent, in an interview on CNBC, stated that it is up to the Federal Reserve to decide on interest rates. He added that if the Fed does not cut in July, "perhaps interest rate cut in September will be bigger."
Key Quotes:
UNDERSTAND VIETNAM TRADE DEAL IS FINALIZED IN PRINCIPLE
TARIFFS COULD LEAD TO ONE-TIME PRICE BUMP
WE ARE GOING TO SEE MORE TRADE DEALS
COUNTRIES SHOULD BE CAREFUL, THEIR RATE COULD BOOMERANG BACK TO APRIL 2 RATE
WE'LL SEE WHAT WE CAN DO WITH EU
JAPAN HAS A LOT OF DOMESTIC CONSTRAINTS GIVEN UPPER HOUSE ELECTION ON JULY 20
EXPECT ACCELERATION IN PRIVATE SECTOR INVESTMENT AFTER PASSAGE OF TAX AND SPENDING BILL
IT IS UP TO FED TO DECIDE RATES
IF FEDERAL RESERVE DOESN'T CUT, PERHAPS INTEREST RATE CUT IN SEPTEMBER WILL BE BIGGER
LOTS OF GOOD CANDIDATES FOR FED CHAIR, WILL START WORKING ON THAT IN THE FALL
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
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