Treasury Secretary Bessent says more Fed rate cuts are 'only ingredient missing' for stronger economy

• The Fed reduced rates to 3.5%-3.75% range through three cuts totaling 0.75 percentage points in the final four months of 2025, but markets now price in just two cuts for 2026
• Bessent is overseeing the selection of Powell's replacement from five candidates, with National Economic Council leader and former Fed Governor Kevin Warsh reportedly among frontrunners
• The Treasury Secretary's call for rate cuts supports the Trump administration's economic agenda while acknowledging the risk that lower rates could reignite inflation

Summary: Treasury Secretary Pushes for Fed Rate Cuts to Boost Economic Growth

Treasury Secretary Scott Bessent advocated for additional Federal Reserve interest rate cuts in a Thursday speech to the Economic Club of Minnesota, calling lower rates "the only ingredient missing for even stronger economic growth." He emphasized that rate reductions would have tangible impacts on Americans' lives and urged the Fed not to delay action.

Key Data Points:

• The Fed implemented three rate cuts totaling 0.75 percentage points in the final four months of 2025
• Current Fed funds rate stands at 3.5%-3.75%
• Markets currently price in only two cuts for 2026
• Fed officials' most recent projections indicate just one cut this year

Policy Context:

Bessent credited President Trump's 2025 economic agenda for laying foundations for growth, citing the "One Big Beautiful Bill" passage, new trade deals, and deregulation efforts. He expressed confidence that 2026 would see rewards from the "America First agenda."

Leadership Transition:

A significant development involves the upcoming Fed chair transition, with Jerome Powell's term ending in May 2026. Bessent is overseeing the selection process and has narrowed candidates to five finalists, with National Economic Council leader and former Fed Governor Kevin Warsh among leading contenders.

Market Implications:

The administration's public pressure for rate cuts creates potential tension with Fed independence. While lower rates could support a weakening labor market and stimulate growth, they risk reigniting inflation. The divergence between the administration's desires and the Fed's cautious stance—combined with upcoming leadership changes—introduces uncertainty for monetary policy direction and market expectations in 2026.