Treasury Secretary Scott Bessent expressed concerns on Sunday about certain sectors of the U.S. economy, particularly housing, potentially entering a recession due to high interest rates. In an appearance on CNN’s “State of the Union,” Bessent noted, “I think that we are in good shape, but I think that there are sectors of the economy that are in recession,” while criticizing the Federal Reserve for causing distributional issues through its current monetary policies.
Bessent highlighted that although the overall U.S. economy remains robust, elevated mortgage rates are negatively impacting the real estate market, specifically affecting low-income consumers who are more burdened by debt than they are benefiting from assets. This is apparent as pending home sales in the U.S. remained flat in September, as reported by the National Association of Realtors.
Characterizing the economy as being in a transitional phase, Bessent’s remarks come in the wake of Fed Chair Jerome Powell’s recent indication that the central bank may refrain from cutting rates further at its December meeting. This stance has drawn criticism from Bessent and other officials from the Trump administration.
Additionally, Fed Governor Stephen Miran, who is currently on leave from his role as chairman of the White House Council of Economic Advisers, expressed similar concerns to the New York Times. He warned that prolonged tight monetary policy risks inducing a recession, asserting that a rate cut of 50 basis points is warranted rather than the recent 25 basis point reduction.
Bessent posited that the Trump administration’s efforts to cut government spending had effectively reduced the deficit-to-GDP ratio, which he believes could help combat inflation. He stated, “If we are contracting spending, then I would think inflation would be dropping. If inflation is dropping, then the Fed should be cutting rates.”
This ongoing dialogue highlights the tension between government officials and the Federal Reserve as they navigate economic conditions and strive to foster a stable financial environment. There is an underlying hope that targeted measures can promote recovery in affected sectors and ultimately support long-term economic growth.