Treasury Secretary Scott Bessent said Thursday that the bond market is signaling that the Federal Reserve should be cutting rates.
“We are seeing that two-year rates are now below fed funds rates, so that’s a market signal that they think the Fed should be cutting,” Bessent said Thursday on Fox Business Network’s “Mornings with Maria.”
The fed funds rate is the benchmark interest rate set by the Federal Reserve, an overnight rate that influences rate levels on all bond maturities from three months to 10 years.
The Fed’s policy rate is currently set in a range of 4.25% to 4.5%. The yield on the two-year Treasury sits at 3.75% as of Thursday.
Traders don’t expect the Fed to lower rates at its next meeting on May 6-7, but they are betting on a cut in June and more cuts later in the year.
The Treasury secretary’s new comment follows a number of suggestions from President Trump that the Fed and its chairman, Jerome Powell, should lower rates.
“I have a guy in the Fed, not a huge fan,” Trump said Wednesday. “We should have interest rates go down and be positive.”
Read more: How the Fed rate decision affects your bank accounts, loans, credit cards, and investments
The president has offered plenty of new signs this week that he does not intend to let up on the central bank or its chairman a week after saying he has “no intention” of firing the central bank boss.
It was Trump himself who stoked speculation about Powell’s fate after asserting on social media last month that “Powell’s termination cannot come fast enough.”
The assurance he wouldn’t try to remove Powell helped calm investors worried that Trump was ready to upend the Fed’s leadership and directly challenge its independence.
But then this week Trump once again went after the Fed and Powell, saying at a rally in Michigan that “I have a Fed person who is not really doing a good job.”
He didn’t mention Powell by name, with Trump saying, “I want to be very nice and respectful to the Fed.”
“You are not supposed to criticize the Fed; you are supposed to let him do his own thing, but I know much more than he does about interest rates, believe me,” he added.
Bessent said earlier in the year that he and the president were focused not on the Fed but on bringing down the yield on the 10-year Treasury, and he repeated that focus in his Thursday appearance on Fox.
“There’s been a substantial decrease in the 10-year since the beginning of the year, but especially since Jan. 20,” he said. “And President Trump and I are targeting that point on the curve.”
The yield on the 10-year Treasury has been volatile over the past month as the administration announced the steepest tariffs in a century, only to pause them as businesses scrambled to import inventories they need from abroad and were unsure of what could happen next.
The yield has been mostly range-bound around 4% to 4.5%. The 10-year yield on Thursday was 4.15%.
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