Federal Reserve Chair Jerome Powell’s recent comments have left the cryptocurrency market less than satisfied, sparking a downturn marked by echoes of similar sentiments from various Fed officials. However, ex-President Trump has an optimistic outlook for 2025, predicting that inflation will continue its downward trend and advocating for lowered interest rates. U.S. Treasury Secretary Scott Bessent is poised to play a more active role in this unfolding scenario.
What Direction Will Interest Rates Take?
Bessent expressed discontent with Powell’s recent speech, criticizing the Fed’s high interest rate stance. He feels a reduction of 100-150 basis points is necessary and opposes the current tight monetary policies amid employment contraction. Fed members appear fixated on inflationary concerns, potentially sidelining other economic indicators.
“Fed has maintained very high interest rates for too long. We are entering a relaxation cycle.
Interest rates are too restrictive and need to decrease. I was surprised that Fed Chairman Powell did not specify the target for interest rates. Revisions in employment figures indicate that something is amiss. Powell should have signaled a reduction of 100-150 basis points.
I will have many Fed discussions next week. I plan to complete the first round by the first week of October.
I am not overly concerned about a recession. I believe we will see a significant reduction in inflation.
We will meet again with China in October and November.”
Can Fed Policies Shift Expeditiously?
The Fed’s autonomy, intact for over half a century, persists despite Trump’s presidency. Miran’s potential role could sway some Fed members toward rate cuts next year. Nevertheless, with many sharing Powell’s perspective, success for Bessent and Miran may remain speculative.
For the Trump administration’s new economic strategy to succeed, its components—immigration reforms, OBBB, and tariff adjustments—must collaboratively work towards reducing inflation. Only then might the Fed consider cutting interest rates, albeit with delays.
A continued dip in employment could eventually alarm the Fed, prompting quick rate cuts to counter potential rising unemployment. Such decisions will heavily rely on the forthcoming economic data.
Powell and his team hesitated in 2021, avoiding rate cuts when inflation surged. Now, they might face a reverse scenario, showing similar indecisiveness regarding rate reductions.
A clearer economic picture will emerge only as the Fed juggles inflation management with employment metrics, amid Trump’s administration’s strategic economic changes ahead of 2025.
