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Bessent Says Fed Needn’t Rush Rate Cuts as Iran War Keeps Inflation Risks Elevated
Summary
- U.S. Treasury Secretary Scott Bessent said inflation risks remain elevated because of the war involving Iran and that the Fed should wait and see on interest-rate cuts.
- Bessent said disruptions in the Strait of Hormuz could drive energy prices higher and rekindle inflation, stressing that policy caution is needed in the current environment of uncertainty.
- Markets have raised the probability that Fed rate cuts will not happen this year to about 58%%, the highest level in recent months.
Forecast Trend Report by Period
U.S. Treasury Secretary Scott Bessent said the Federal Reserve should be cautious about cutting interest rates because geopolitical risks in the Middle East continue to pose inflation threats.
Walter Bloomberg reported on April 14 that Bessent said inflation risks remain elevated because of the war involving Iran and that the Fed should "wait and see" on rate cuts.
He specifically cited the risk of disruptions in the Strait of Hormuz, saying higher energy prices could rekindle inflation.
Bessent left open the possibility of rate cuts over the longer term, but stressed that policymakers need to remain cautious in the current environment of uncertainty.
Markets see geopolitical risks as one factor behind the Fed's decision to hold rates steady despite pressure from President Donald Trump.
Bessent also addressed global imbalances, saying the world cannot absorb a $1 trillion Chinese trade surplus.
Meanwhile, markets are pricing in about a 58% chance that the Fed will not cut rates this year, the highest level in recent months.
Minseung Kang
minriver@bloomingbit.ioBlockchain journalist | Writer of Trade Now & Altcoin Now, must-read content for investors.
