WASHINGTON – US Treasury Secretary Scott Bessent on April 14 said he was quite confident that core inflation would continue to go down in the United States despite the Iran war, and repeated his call for the Federal Reserve to cut its interest rates.
Mr Bessent said he could understand if US central bankers wanted to observe economic developments related to the war before they cut rates, adding that it also made sense for US President Donald Trump’s nominee as Fed chair, Mr Kevin Warsh, to lead the next cycle of monetary adjustments.
Asked if the Trump administration would accept current Fed chair Jerome Powell staying in the top spot after his term ends on May 15, if Mr Warsh’s nomination was not approved by the Senate by then, Mr Bessent said, “We want Kevin Warsh in as soon as possible.”
Mr Bessent told Semafor on April 13 that the Federal Reserve should “wait and see” before deciding whether to lower interest rates amid the war in Iran, noting that the US economy had been “very strong” in January and February, and that the Fed is “doing the right thing by sitting and watching” how the conflict plays out.
Asked if that signalled a shift in the Trump administration’s longstanding calls for the Fed to cut interest rates, Mr Bessent said, “No, no, no. If you notice, I said that they could, they could observe before they cut rates. So… the impetus here is (that) they still, they will need to cut rates.”
Mr Bessent downplayed the impact of the Iran war on core inflation, which he said was under control and actually dropping in many categories. He said he expected prices to come down quickly after the conflict ended.
US consumer prices rose by the most in nearly four years in March as the war drove a record surge in the cost of gasoline and diesel, dealing a blow to Mr Trump’s approval ratings as discontent grew over his handling of the economy. Core prices excluding food and energy rose less.
The war has sent global crude oil prices surging as much as 50 per cent, with the national average retail gasoline price breaking above US$4 a gallon for the first time in more than three years.
Mr Trump’s nomination of Mr Warsh to succeed Mr Powell at the helm of the Fed is stalled for now due to objections by a key Republican senator, Mr Thom Tillis, who is not running for re-election.
Mr Tillis said he will continue to block all of Mr Trump’s Fed nominees until a Justice Department criminal investigation of Mr Powell is closed.
Mr Powell has said he will stay on as chair temporarily if Mr Warsh is not confirmed and in place by the time his term expires in May. Mr Powell also holds a governor slot that runs through 2028, if he wishes to stay.
Mr Bessent said Treasury had a deal with Mr Tillis to allow Mr Warsh’s nomination hearing to proceed, something that could happen next week, but gave no further details. REUTERS
