Bessent Suggests Fed Should Hold Off On Rate Cuts For Now Amid War Uncertainty

Treasury Secretary Scott Bessent on Tuesday signaled he had no objection to the Federal Reserve keeping interest rates on hold for now as officials monitor the fallout from the Iran war, but added that borrowing costs should eventually come down.

“The impetus here is they will need to cut rates,” Bessent told reporters during a roundtable after making remarks at the Institute of International Finance. He said he was “highly confident” that price pressures beyond more volatile food and energy costs would continue to ease.

But, he said of the Fed, “if they want to wait for some clarity, I understand that."

President Donald Trump has pressed the Fed for more than a year to dramatically lower borrowing costs, saying that elevated rates were holding back the economy.

But Bessent’s comments suggest the administration does not expect Fed Chair Jerome Powell to reduce rates before his term atop the central bank ends in mid-May. The Treasury chief argued that Trump’s nominee to succeed Powell, Kevin Warsh, should instead chart the path forward on rates for the rest of the year.

“We should wait for the new chairman, Warsh, and let him lead the next cycle,” Bessent said.

Trump has said he expects Warsh to cut rates.

The nominee moved a step closer to confirmation this week, as the Office of Government Ethics posted his financial disclosures, showing he's worth at least $131 million. The Senate Banking Committee is aiming to hold a hearing on his candidacy next Tuesday.

But Sen. Thom Tillis (R-N.C.), a senior member of the committee, has said he will not vote to advance Warsh’s nomination until a Justice Department probe into the Fed’s headquarters renovation project has been concluded.

Tillis, like Powell, has raised fears that the investigation is a pretense to pressure the Fed to lower rates, a concern shared by a federal judge who blocked DOJ subpoenas.

Asked about the standoff, Bessent said his plan was to “let this play out” and would not comment directly on whether the administration would object to a scenario where Powell stays in his current role in an acting capacity, if Warsh is not confirmed in time.

“We want Kevin Warsh in as soon as possible,” Bessent said.

Meanwhile, the Treasury chief would not put a timeline on how long he believes gas prices might stay elevated due to the conflict in Iran, saying it was “all path dependent.”

But, he said, prices would ease once the war concludes.

“The conflict will end, prices will come down, and then headline inflation will come down,” he said.