Scott Bessent, president Donald Trump’s handpicked Treasury Secretary, put an end to the speculation during a Wednesday interview on Fox Business. The president is not pressuring the Federal Reserve to cut interest rates, Scott said.
Instead, he claims that the administration’s focus is laser-locked on long-term borrowing costs, specifically the 10-year Treasury yield. “He and I are focused on the 10-year Treasury,” Scott said. “He is not calling for the Fed to lower rates.”
Scott’s claims are a bit odd since as Cryptopolitan reported on Jan. 24, Trump did say “I’ll demand that interest rates drop immediately. And likewise, they should be dropping all over the world. Interest rates should follow us all over.”
Tariff tactics and manufacturing goals
Scott then laid out exactly why long-term yields are more important to Trump’s economic strategy, explaining that expanding the US energy supply will help curb inflation. With inflation strangling consumers and businesses, the administration is betting that lower energy costs will have a knock-on effect, making goods cheaper and long-term borrowing more manageable.
But not everyone is clapping for these guys. Democrats are seething after Scott gave Elon Musk’s controversial D.O.G.E department access to federal Treasury data, a decision that triggered accusations of recklessness and even protests outside the Hill.
In the interview, Scott defended the decision head-on, saying, “The US has a serious spending problem, which is fast becoming a detrimental economic problem. My focus is on the national debt and the budget deficit. I want to bring it down and increase the GDP. D.O.G.E is exactly what we need.”
Scott also went full steam ahead on Trump’s trade policy, explaining how the administration is using tariffs as a weapon to revive domestic industries. Medical supplies and shipbuilding are high on the list of targeted sectors.
Tariff threats against Colombia, Mexico, and Canada, he said, were designed to pressure them into cooperating on immigration and trade-related issues. But the ultimate objective, according adding Scott, is to bring manufacturing jobs back to the US “We’re aiming for long-term growth,” he said, hinting that once American factories are up and running, the revenue generated by tariffs will naturally drop off.
Trump’s team is playing the long game — squeeze trading partners now to create a self-sufficient industrial base later, said Scott. Despite criticizing former Treasury Secretary Janet Yellen’s strategy before taking office, Scott is keeping much of her framework in place for now.
Next week, the Treasury will auction $125 billion in long-term debt, with sales broken down into 3-year, 10-year, and 30-year maturities.
The auctions include $58 billion in 3-year notes, $42 billion in 10-year notes, and $25 billion in 30-year bonds. These auctions are designed to raise $18.8 billion in new cash, and for now, Scott isn’t making any drastic changes to the way Treasury handles long-term borrowing.
But why stick with Yellen’s plan when he previously criticized it? Simple—Scott is playing it cool, letting the dust settle before shaking things up. And while Treasury insiders are itching for tweaks, especially to long-term issuance, Scott is choosing stability over chaos.
Debt ceiling constraints and Fed quantitative tightening
The federal debt ceiling, reinstated after a suspension in mid-2023, has forced Scott’s department into “extraordinary measures” to avoid breaching the limit. Treasury officials warned that these debt ceiling constraints could make Treasury bill issuance more volatile than usual.
The department also announced it would rely heavily on short-term cash management bills to navigate the crisis until Congress either raises or suspends the cap.
Another complication comes from the Federal Reserve’s ongoing quantitative tightening program, which is sucking $25 billion worth of Treasuries out of circulation each month. With fewer buyers in the market, the Treasury is being forced to rethink its borrowing strategy.
In his interview, Scott said he is keeping a close eye on when the Fed might slow—or fully stop—this policy. Dealers now expect QT to end sometime in the summer, slightly later than the original spring estimate, creating additional pressure on Treasury’s borrowing needs by 2025.
The Treasury Borrowing Advisory Committee (TBAC), a group of Wall Street players and economists, has urged the department to modify its forward guidance to reflect market unpredictability. Some members of the panel want the language scrapped altogether, but others prefer more cautious adjustments.
Scott isn’t letting them call the shots. Responding to TBAC’s recommendations, he reminded everyone that their advice is just that—advice. “The Treasury decides.”
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Source: https://www.cryptopolitan.com/treasury-secretary-bessent-says-trump-is-not-calling-for-the-fed-to-lower-interest-rates/