Scott Bessent Changes His Position on Interest Rates

U.S. Treasury Secretary Scott Bessent has said the Federal Reserve should “wait and see” before lowering interest rates amid the war in Iran, after months of backing President Donald Trump’s calls for aggressive cuts.

Speaking to the Semafor news outlet on Monday, Bessent said that rates should come down “eventually,” but that the strength of the U.S. economy in the opening two months of 2026 had postponed the need for urgent intervention. He added that Fed officials, who have held rates steady since their December meeting, were “doing the right thing by sitting and watching” how the conflict in the Middle East impacts domestic economic conditions.

Why It Matters

Bessent’s statement represents a rare admission from the Trump Cabinet that the U.S. economy could be pushed off course by the war which began February 28, one that certain economists have warned raises the risk of the country moving closer to a downturn. Iran’s effective closure of the Hormuz Strait has sent oil prices soaring, leading to higher gas prices in the U.S. and driving headline inflation to its highest annual rate across either of Trump’s terms.

What To Know

Previously, Bessent had been a strong advocate for easing, telling Bloomberg in August that the Fed’s benchmark rate should “probably be 150, 175 basis points lower.”

The Fed cut rates at three successive meetings beginning in September, but Bessent in January said that the central bank could lower these further to support consumers and businesses.

“Cutting interest rates will have a tangible impact on the lives of every Minnesotan,” he said in a speech at the Economic Club of Minnesota, according to excerpts obtained by CNBC. “It is the only ingredient missing for even stronger economic growth. Which is why the Fed should not delay.”

However, inflation expectations have risen since the war began—largely due to the surge in global energy costs—clouding the Fed’s path toward future cuts.

Weeks into the conflict, Fed officials voiced concerns that this had added “uncertainty” to the country’s economic outlook, according to minutes of their March meeting published last week.

“Participants noted that a prolonged conflict in the Middle East would likely lead to more persistent increases in energy prices and that these higher input costs would be more likely to pass through to core inflation,” the minutes read.

“It’ll come down to how long, you know, the current situation lasts, and then what are the effects on prices and then how do consumers react and that kind of thing,” Fed Chair Jerome Powell said in a press conference following the meeting.

Powell added that the war would prove “a big factor” affecting officials’ thinking going into its next rate-setting meetings.

Last week’s inflation report appeared to confirm some of these fears, with the monthly inflation rate tripling to 0.9 percent in March and rising to 3.3 percent from 2.4 percent on an annual basis. However, core inflation—which strips out the food and energy categories—increased by slightly less than analysts had forecast prior to the reading.

On Monday, Bessent said that these price impacts would be short-lived and not materially impact the country’s long-term economic outlook.

“If ever there was ‘Team Transitory,’ it’s this,” Bessent told Semafor. “I don’t believe this is going to get embedded into inflation expectations.”

Last week also saw the annualized U.S. GDP growth rate revised down to 0.5 percent for the fourth quarter of 2025, compared with 4.4 percent in the third quarter and a previous estimate of 0.7 percent.

Bessent had previously said he expected the economy to grow by over 4 percent in 2026. He told Semafor he still held this view “in theory, even though we have a big catch-up.”

What Happens Next

The Federal Open Market Committee will host its next meeting on April 28 and 29, with financial exchange CME’s FedWatch tool forecasting that officials will hold rates steady until later in the year.