The bond market sends a signal that the Federal Reserve must cut interest rates, US Finance Minister Scott Besent said on Thursday, noting that the results of the 2 -year treasury record were lower than the central bank policy level.
“We see that the tariff of two years is now below the Fed Fund rate, so it is a market signal that they think Fed must cut,” Besent said in an interview on the “Morning with Maria” Network Business Network program.
The 2 -year note on Thursday was around 3.57%, down around 5 basis points on that day and around three -quarters of the percentage points below the daily effective federal fund rate of 4.33%. The Fed’s policy rate is set in the range of 4.25% to 4.50%, which has been since December after cutting the percentage of points at the end of last year.
Fed officials have been in a position to wait and see because when they assess the impact of President Donald Trump’s new policy, especially about how the tariff sweeping the imported goods he will affect inflation, demand, and the work market.
The distribution between the Fed level and the 2-year results, the bond market proxy for the hope where the monetary policy is led, has widened continuously over the past two months. It has come as a fixed income investor in both treasury and the future of interest rates has spinned to bet Fed will cut interest rates with a full percentage of this year or two times the latest median estimates among Fed’s own policy makers-Economic so that economic weakens in the face of Trump’s tariffs.
Indeed, the Department of Trade on Wednesday reported that the economy contracts unexpectedly in the first three months of this year because of the historical importance of imports to defeat tariffs, and many private economists are now looking at the risk of direct recession which increases later this year.
Bessent, who as Minister of Finance usually meets every week with Chairman Fed Jerome Powell, said that there has been a decline in the famous results in the 10 -year treasury record, and that’s where he and Trump administration devoted more of their attention because it was more directly affecting loan costs for households and business.
That level, which affects the cost of high profile loans such as housing hypotek, has dropped about half the percentage point since Friday before the inauguration of Trump in January, although the bond market is very unstable over the past month due to the implementation of uncertain presidential tariffs.
The level of mortgage with a fixed interest rate of 30 years on average is around 6.81% last week after climbing suddenly about 20 basis points in mid-April on the heel of the bond market.
Source: Reuters
