Steven Mnuchin on FED’s Monetary Policy Direction

Former US Treasury Secretary and founder of Liberty Strategic Capital, Steven Mnuchin, made significant assessments regarding the FED’s monetary policy during a CNBC program.

Mnuchin expects the Fed to cut interest rates by a total of 75 to 100 basis points over the next 12 months. He noted that FED Chairman Jerome Powell is taking a “wait-and-see” approach, and the market has already accounted for this reduction, anticipating a gradual decrease. He stated, “I think we will see a decrease in interest rates of about 100 basis points, unless there are any surprise developments,” attributing Powell’s cautiousness to the lasting effects of inflation, which was previously described as “temporary.”

Mnuchin also expressed optimism regarding upcoming trade deals from Trump, suggesting that if negotiations progress, some tariff decisions due in July might be postponed. He mentioned, “The tariffs that have been implemented so far have not increased inflation, supporting the market’s expectation of low interest rates.” Continued negotiations with countries like China, India, and Japan are ongoing.

Touching on TikTok, Mnuchin predicted that the President would reach an agreement on the platform. He suggested a solution involving new investors partnering with the company rather than a direct sale, and noted his own investment interests are currently inactive.

Regarding long-term interest rates, Mnuchin indicated they are pricing in future FED cuts, forecasting 10-year bond yields to fall within the 4% – 4.25% range but unlikely to drop below 4%. He did not anticipate a serious economic slowdown, as the market reflects this outlook.

Mnuchin underscored the importance of the “big tax package” expected to pass the Senate, asserting that extending the Trump-era tax cuts is crucial for the market. While he acknowledged long-term debt and deficits as significant issues, he believes deficits could be managed if economic growth remains around 3%; otherwise, public spending cuts would be necessary.

> Note: This is not investment advice.