Yesterday, Jerome Powell’s statements did not please cryptocurrency investors, as was evident from the remarks of Federal Reserve members. The recent market decline was triggered by similar tones from many members. However, former President Trump, with his actions slated for 2025, foresees a continued decline in inflation and suggests that interest rates should decrease. Treasury Secretary Scott Bessent is expected to show more involvement in this matter.
Fed Interest Rate Cuts
U.S. Treasury Secretary Scott Bessent expressed his dissatisfaction today with Powell’s speech the previous day. Bessent believes Powell should have signaled a reduction of 100-150 basis points and is quite uncomfortable with the strict monetary policy. Despite the employment contraction, many Fed members continue to focus on the inflation aspect of their dual mandate.
“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.”
Will Interest Rates Decrease?
Trump may have taken office, but the Fed has been an independent institution for 55 years. The appointment of Miran could provide an additional boost for convincing Fed members to lower rates by next year. However, since a significant portion of the members share Powell’s views, Bessent and Miran’s efforts may be limited.
Therefore, the Trump-inspired economic strategy detailed yesterday and announced by Miran needs to succeed. Immigration policies, OBBB, and tariffs must collectively reduce inflation so that the Fed may eventually lower interest rates, although it might be delayed.
If employment continues its current trajectory, it might signal a potential surge in unemployment, potentially convincing Powell and his team to enact rapid cuts. At this stage, the compelling factor will be the forthcoming data.
Powell and most of his team refrained from reducing interest rates in 2021 when inflation was peaking, taking delayed action. Now, the situation might be the reverse, but with a similar pattern.
