Scott Bessent Says Fed Could Cut Rates by September or ‘Sooner’

“I think that the criteria is that tariffs were not inflationary. If they’re going to follow that criteria, I think that they could do it sooner than then, but certainly by September,” Bessent said, adding that “I guess this tariff derangement syndrome happens even over at the Fed.”

His comments on Fox News’s The Ingraham Angle come as President Trump, Bessent’s boss, ramps up pressure on the Fed and Chairman Jerome Powell to lower rates by as much as three percentage points.

“Jerome—You are, as usual, ‘Too Late,'” Trump told Powell in a note posted on Truth Social Monday, accusing the Fed chair of having “cost the USA a fortune” and urging him to “lower The Rate—by a lot!”

Bessent has also stepped up his commentary on the Fed this week, reiterating that no inflation has yet materialized from tariffs, and if it does, it would be a one-time increase that wouldn’t justify rate hikes.

Bessent is among those considered to replace Powell when the Fed chair’s term ends next May, according to sources close to the administration.

On Bloomberg Monday, Bessent likened the Fed to an elderly person who falls and then risks falling again because they keep looking down at their feet. The original fall, in his view, was the Fed’s slow response to inflation rising in 2022.

“They seem a little frozen at the wheel here,” Bessent said.

On Tuesday, Powell did not rule out a rate cut at the Fed’s upcoming meeting on July 28-29 but noted the central bank would have lowered rates already if not for tariffs imposed by the Trump administration.

“We went on hold when we saw the size of the tariffs and essentially all inflation forecasts for the United States went up materially as a consequence of the tariffs,” Powell said during a European Central Bank monetary policy conference in Portugal.

The Fed cut rates by a full percentage point in 2024 but has held steady so far this year as it waits to see if inflation will pick up this summer due to tariffs.

“I wouldn’t take any meeting off the table or put it directly on the table,” Powell said when asked about a possible July cut. “It’s going to depend on how the data evolved.”

Bessent told Fox that Fed officials recently downgraded their U.S. economic growth forecast, which he believes justifies rate cuts by September, especially since inflation has eased since the Fed’s 50 basis point cut in September 2024.

“Sure, why not the fall?” he said.

Signs of a labor market slowdown surfaced Wednesday, as data showed private employers unexpectedly cut 33,000 jobs in June.

ADP reported private payrolls fell 33,000 in June, down from 29,000 job gains in May and missing economist expectations of 98,000 new jobs.

This was the first monthly private sector job loss since March 2023. May’s initial figure of 37,000 additions was the lowest since that same month in 2023.

Another Labor Department report is due Thursday, with economists forecasting 116,000 nonfarm payroll additions in June, down from 139,000 in May. The unemployment rate is expected to rise to 4.3% from 4.2%.

Two Fed governors, Christopher Waller and Michelle Bowman, have voiced support for July rate cuts, emphasizing concerns about the labor market and unemployment over inflation at this stage.

Meanwhile, other Fed officials urge caution, advocating for patience until the full impact of tariffs on inflation becomes clearer.

Atlanta Fed President Raphael Bostic said Monday that he wants to see how tariffs affect the economy before deciding on interest rates, warning that tariff-driven inflation could persist longer than expected.

“I like to move in a direction when I know which direction to move in,” Bostic said during a conversation in the UK. “That would for me require more information than we have today.”