Interest Rate Cuts Possible

Treasury Secretary Bessent indicated that one or two interest rate cuts are possible this year. He also mentioned that he has breakfast with Fed Chair Jerome Powell almost every week.

Meanwhile, it’s noteworthy that President Donald Trump pressured Powell to cut interest rates last month, citing rising federal debt costs. However, according to an analysis by Deutsche Bank’s chief U.S. economist Matthew Luzzetti and his team, dismissing Powell and forcing a rate cut wouldn’t have the expected impact on debt costs.

Trump has argued that cutting interest rates by 3% would save $1 trillion. However, Deutsche Bank’s calculations show that such a move would lower yields on short-term Treasury bonds but push yields on longer-term bonds higher, driven by market concerns that a more compliant Fed would fuel inflation. Accordingly, Powell’s dismissal would only save the Treasury between $12 billion and $15 billion by 2027.

This is not investment advice.