Treasury Secretary Scott Bessent Downplays Inflation Concerns Amid Trump's Tariffs
Treasury Secretary Scott Bessent expressed confidence in the administration's ability to manage inflation despite President Donald Trump's recent tariffs, stating that "I am not worried about inflation" resulting from these measures. However, he acknowledged that there could be a one-time price adjustment as a result of the tariffs. This stance was revealed during his speech before the Economic Club of New York on Thursday.
Bessent emphasized that the potential for a one-time price adjustment should not affect the thinking of the Federal Reserve, which has been grappling with inflation rates above its 2% target. The Fed held its interest rates steady last month after three consecutive reductions at the end of 2024, and its next meeting is scheduled for March 18-19.
To support his position, Bessent invoked the concept of "transitory" inflation, which was previously used by central bank policymakers during the early stages of the COVID-19 pandemic. He argued that tariffs are a transitory phenomenon that should not be taken into account when making long-term policy decisions.
Bessent also highlighted the administration's efforts to bring down 10-year Treasury yields, which rose for a third consecutive session on Thursday to 4.28%. However, he noted that this rate is still lower than the yield of over 4.6% when Trump took office. The secretary attributed this development to the president's focus on reducing long-term borrowing costs through sound fiscal policy.
In this context, Bessent pointed out that the administration aims to achieve lower spending, make permanent the tax cuts implemented during Trump's first term, and ensure no taxes on tips, Social Security, or overtime pay. He also emphasized the importance of making full expensing for capital equipment retroactive to January 20 and exploring options for full expensing of factories and equipment.
Furthermore, Bessent championed the goal of collecting revenue from tariffs to fund tax cuts. The so-called reciprocal tariffs are set to take effect on April 2, which could impact various nations, including Canada. In this regard, Bessent addressed the Canadian government's stance on tariffs, suggesting that countries should engage in discussions with the Commerce Department and USTR to avoid escalating tensions.
In addition to his comments on trade policy, Bessent discussed changes to bank regulations aimed at encouraging big lenders to start lending again. He clarified that he does not support a consolidation of bank regulatory agencies but instead advocates for better coordination among agencies using the Financial Stability Oversight Council, which he leads.
"We need our financial regulators singing in unison from the same song sheet," Bessent emphasized during his speech.