Treasury Secretary Scott Bessent has outlined the Trump administration’s plan to lower long-term interest rates, which is aimed at boosting economic growth. Unlike the Federal Reserve, which focuses on short-term interest rates, the administration aims to influence the 10-year US Treasury yield.
Bessent has stated that the administration wants to deregulate the economy, pass a tax bill, and reduce energy costs to lower interest rates naturally. This approach deviates from traditional monetary policy, where the Fed directly influences short-term interest rates.
In contrast, Bessent said the administration is not focused on whether the Fed will cut interest rates. Instead, it aims to respect the central bank’s independence and allow fiscal policy and deregulation to influence the 10-year yield.
The 10-year Treasury yield has a significant impact on borrowing costs for Americans. A lower yield would make it cheaper to borrow money, particularly for mortgages and credit cards.
Bessent points out that the Fed’s rate cuts in recent years have not necessarily led to lower 10-year yields. This suggests that other factors, such as changes in investor sentiment, are influencing the yield.
The Trump administration aims to boost economic growth through “expansionary” policies, including reducing government spending and promoting deregulation. By focusing on long-term interest rates, the administration seeks to establish monetary policy independence, excluding political influence from interest rate decisions.
This approach is seen as a departure from traditional monetary policy and has been welcomed by some economists, who believe it will help limit inflation expectations and promote growth without sparking inflation.
Source: https://edition.cnn.com/2025/02/06/economy/bessent-interest-rates-without-fed/index.html