The News
The Federal Reserve should “wait and see” before deciding whether to lower interest rates amid the war in Iran, US Treasury Secretary Scott Bessent said Monday at Semafor World Economy in Washington, DC.
“Do I think rates should be lowered? Eventually. I think now that we have to wait and see,” Bessent told Semafor Editor-in-Chief Ben Smith. “But I think as we went into January [and] came out of January and February — the economy was very strong.”
US President Donald Trump has spent much of his second administration lobbying for the central bank to slash interest rates. For now, the Fed is “doing the right thing by sitting and watching” how the Iran conflict plays out, Bessent said.
Bessent said he’s confident recent price increases won’t permanently alter how consumers view the economy. The US government said Friday that inflation rose three times faster in March than it did in February amid surging oil and gas costs. Inflation excluding food and energy, however, rose slightly less than forecasters had anticipated.
“If ever there was ‘Team Transitory,’ it’s this,” Bessent said. “I don’t believe this is going to get embedded into inflation expectations.”
Asked whether the war in Iran would wind up being good or bad for the US economy, Bessent said: “I think we will look back and say — I don’t know the number of days, whether it’s 50 or 100 or more — for 50 years of stability.”
Bessent also said he thought in February that the economy would have grown more than 4% this year. Asked whether he still thought that, he said: “Obviously, we’re going to have some make-up to do.”
“In theory [yes], even though we have a big catch-up,” Bessent added.
Know More
In a 23-minute interview at the Semafor World Economy’s inaugural Treasury Secretary Dinner at the Library of Congress, Bessent weighed in on a range of other subjects, including:
A forthcoming executive order requiring banks to collect citizenship information on their customers: “It’s in process. And I don’t think it’s unreasonable, because: Why don’t we have information on who’s in our banking system? I have a place in the UK; they want to know who lives in every apartment — and how do we know that it’s not part of a foreign terrorist organization?”
On Kevin Warsh’s pending nomination to the Fed: “My criteria is who has an open mind. … With the Fed, you expect a monetary policy board, but you never think there’s this sprawling organization up there. … He’s going to do a serious look at how the reserve banks interact. I think the reserve banks [are] a management disaster, because something like 50% of the people in each reserve bank do not report to the president.”
On Sen. Thom Tillis, R-N.C., opposing Warsh’s nomination over the Trump administration’s investigation into Fed Chair Jerome Powell: “We’ll have to see what Senator Tillis needs to do.”
On potential insider trading in prediction markets: “I spoke to the head of the CFTC the other day” and “didn’t notice anything unusual. … I would use them more as a tool. … People always forget in markets what’s priced in and what’s unexpected. So I think the good thing about prediction markets is it tells you where the consensus is.”
On concerns over AI making banks vulnerable to cyberattacks: Bessent called reports of a recent meeting with bank CEOs over Anthropic’s Mythos “dramatized,” adding: “The CEOs happened to be in town, so it was much more convenient just to bring them in and just talk about the cybersecurity of what’s happening with these large language models and to get their thoughts on the way forward.”
On whether Treasury would work with Anthropic on those concerns: “Of course. They have a very specific issue with DOW. So to the extent that they are widely used in the market, we would.”
On fears the war in Iran could weaken the US dollar: “Well, as you’ve seen during the war, the dollar is strengthened. So I’m not worried about that.”
On whether the US underestimated China’s rare-earths leverage: “I actually think they miscalculated, because … three times in five years, they have proved that they’re not a reliable supplier.” He pointed to Covid, rare earths; and most recently, energy products: “It’s not a great business.”
On whether Trump should entertain allowing Chinese automakers to build US factories ahead of an upcoming visit to Beijing: “I think what we’re thinking of is two boards: a Board of Trade and maybe a Board of Investment. I’m not sure. … I think there are these things that I would think maybe the auto industry would supply. I have a house out of the country … and a lot of my neighbors have their small SUVs, and I will tell you it is the best $75,000 car that $35,000 can buy. It is clearly highly subsidized.”