Bessent Faults Powell for Not Signaling 150 bps Fed Rate Cut by Year-End

U.S. Treasury Secretary Scott Bessent has again criticized Jerome Powell over his failure to signal a potential Fed rate cut easing cycle. Bessent believes that the Fed should cut rates by up to 150 basis points (bps), a development that would impact the crypto market.

Bessent Criticizes Powell Over Fed Rate Cut

The Treasury Secretary stated during a FOX Business interview that he is surprised that Powell hasn’t signaled a destination of at least 100 to 150 basis points before the end of the year. This came as he declared that interest rates have been high for too long and are restrictive.

Bessent believes that the U.S. central bank should be entering into a Fed rate cut easing cycle with plans to further lower interest rates following the first cut of the year at last week’s FOMC meeting. However, Powell indicated yesterday during his speech that a rate cut easing cycle is not guaranteed, and their next move will still depend on the incoming data.

Meanwhile, the Treasury Secretary alluded to the softening labor market as the primary reason why the Fed should lower interest rates significantly. He noted that recent jobs data have seen downward revisions, indicating that the labor market might even be weaker than the Fed envisages.

Powell warned that there is currently a double-sided risk in inflation and the labor market. Inflation looks to be rising even as the labor market softens. As such, he is wary of making further Fed rate cuts just to cushion the weakness in the labor market, noting that they might have to reverse course if inflation then gets out of hand.

The Fed’s speech yesterday notably led to a decline in the crypto market, with the Bitcoin price dropping to a 24-hour low of $111,200 overnight, according to CoinMarketCap data. The crypto market has so far shown mixed sentiments to last week’s rate cut, which has so far been a ‘sell the news’ event.

A 50 Bps Cut To End The Year

Market participants are currently pricing in a further 50 bps Fed rate cut to end this year. Traders expect this to happen in the form of a 25 bps cut at the October FOMC meeting and another one at the December meeting.

According to CME FedWatch data, there is currently a 94.1% chance that the Fed will lower interest rates from the current 4% and 4.25% benchmark to 3.75% and 4% following the October meeting. Meanwhile, there is a 77.1% chance that interest rates will drop to between 3.5% and 3.75% at the December meeting.

Fed President Raphael Bostic said that there is no need for further rate cuts this year. Meanwhile, Fed President Alberto Musalem said he will only support a cut if the labor market worsens.

As Powell noted, the Fed rate cut decision will largely depend on incoming data. As such, the market’s attention will be on the incoming PCE data this Friday, which is the Fed’s favorite inflation gauge.