Scott Bessent, a close associate of Donald Trump, a potential Treasury Secretary, and a candidate for Fed chair, has stated that US interest rates should be approximately 150-175 basis points lower. This perspective closely mirrors that of the former US president.
Bessent’s remarks align with the market debate that the Federal Reserve's restrictive policy, maintained for several months, is beginning to seriously impact economic growth and the labor market. On the other hand, despite high interest rates, the US economy remains robust, stock indices are at historical highs, and inflation is still elevated.
According to Bessent, the current interest rate level is far too restrictive. He believes it is limiting growth and that more precise macroeconomic data would justify even deeper cuts.
It is worth noting, however, that Bessent’s chances of becoming the Fed chair are limited, despite his strong trust with Trump. The president himself has indicated that Bessent is likely to remain in his current position. Yesterday, it was reported that Phillip Jefferson and Larry Lindsey have been added to the list of potential candidates.
The US dollar continues to weaken, with the EURUSD pair now at its highest level since July 27, trading above 1.1700. If the Fed does indeed decide to cut interest rates in September and continues to do so in subsequent meetings, this could potentially exert further pressure on the dollar. Moreover, a key event looms: the Trump-Putin meeting. Although the "Trump factor" has largely been priced into the euro since the beginning of the year, a positive outcome from the meeting could lead to a continued rally, a breakout above recent peaks, and a test of the 1.20 level.
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