Bessent Says Fed ‘A Little Off,’ Flags Signal From Two-Year Rate
(Bloomberg) — Treasury Secretary Scott Bessent questioned Federal Reserve policymakers’ judgment on interest rates, reiterating his view that two-year Treasury yields are a signal that their benchmark rate is too high.
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“The committee seems to be a little off here in their judgment,” Bessent said in an interview on Fox Business Thursday, referring to the Fed’s rate-setting Federal Open Market Committee.
The Treasury chief has repeatedly said he would only comment on past Fed policy, not prospective decisions. Even so, he repeated his argument that “two-year rates are telling us that the overnight rate is too high.” The Fed’s benchmark federal funds rate target is an overnight rate. It’s currently set at a range of 4.25% to 4.5%. Two-year Treasury yields are currently around 3.76%.
Bessent declined a specific response when asked about the call by Bill Pulte, the administration’s housing-finance chief, for Fed Chair Jerome Powell to resign over what Pulte claimed was deception in testimony to Congress about renovations at the central bank’s building. Bessent limited his comments to saying the Fed should “get their spending under control, just like everybody else.”
“There are a lot of good, strong candidates” to replace Powell when his term as Fed chair is up in May 2026, Bessent also said. Asked about his own potential candidacy, he said, “I’m not going to reveal private conversations.”
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Bessent also signaled he hopes that Powell leaves the Fed altogether next May. Technically, Powell would be able to stay on the Fed board until 2028, thanks to his separate term as a governor. If he did that, then only Adriana Kugler’s position would be open in 2026, with her term coming due in January.
“We get to hopefully fill two seats next year,” Bessent said.
Speaking as the House continued to deliberate on President Donald Trump’s signature tax and spending bill, Bessent noted that the legislation contains an increase in the federal debt ceiling. The $5 trillion boost “should get us well into 2027,” he said.
The Treasury since January has been using special accounting measures to make good on federal payments while staying within the statutory ceiling. Once the legislation is signed into law, the department is expected to ramp up sales of Treasury bills to restock its cash pile.
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