Bessent stokes flames for interest rate cuts, blaming housing crisis on high rates

The U.S. Secretary of the Treasury Scott Bessent has recently made worrying statements regarding the state of the housing market as a means of justifying interest rate cuts, as other factors like strong inflation data and weak job growth contribute to the accelerating rise in probability of such cuts in the next few months.

U.S. Treasury Secretary Scott Bessent, Jim Watson/Getty Images.

Bessent, a strong supporter of the Trump administration's push to cut rates down significantly, warned that "there are sectors of the economy that are in recession" in an interview on CNN, arguing that "...the Fed has caused a lot of distributional problems with their policies [interest rates]." One of these sectors that he mentioned was the real estate, specifically the housing market.

He believes that mortgage rates for housing remain far too high, with it being a key issue which his administration's campaign ran on addressing in the 2024 Presidential Election. With mortgage rates being very closely tied to the overall interest rate, Bessent pointed to the Fed's hesitance to cut rates by significant margins due to gradually rising inflation and tariff risks. "If the Fed brings down mortgage rates, they can end this housing recession," he argued.

Just recently, in the Fed's October meeting, it was concluded that a 25 basis point reduction in the interest rate would be realized, however the president and members of his administration like Bessent have, for the past several months, been calling for an even larger cut, as much as a full point (1%) cut.

Stephen Miran, a Fed Governor and chair of the White House Council of Economic advisors, echoed Bessent's sentiments. "If you keep policy this tight for a long period of time, then you run the risk that monetary policy itself is inducing a recession," he stated. Even some developers like Dan Coakley agreed with much of the concern about interest rates. "Young people, first-time homebuyers can't afford to buy homes, not only because interest rates are so high, but because median wages have not caught up with costs... The housing market affects everybody… in the lower income, middle income, upper-middle income. And all these people are suffering as a result of this. And I just wish that Fed policy and interest rate policy would consider the impact on, actually, a larger group of people," said Coakley on Fox Business.

These new remarks from Bessent and others reveal the growing tension between the executive branch and the Federal Reserve, as each hold different perspectives on the interest rate issue. But, it also shows the emphasis on rates as a means of a weakening housing market by the administration over other significant factors like supply problems and wage stagnation. And in fact, interest rates have remained high to prevent inflation, especially induced from tariffs, from impacting the average American.

"The Treasury secretary blames central-bank policymakers for America’s economic ills. He should give them credit for our tremendous success," argued a Bloomberg opinion article on Bessent's statements.