Treasury Secretary Scott Bessent said Tuesday morning that the Trump administration plans to cut interest rates.
Updated March 4, 2025, 16:56 UTC Published March 4, 2025, 14:37 UTC
What you should know:
- Treasury Secretary Scott Bessent recently reiterated his commitment to lower interest rates in an interview with Fox News.
- Just a few weeks ago, markets were skeptical about any rate cuts in 2025, but now they fully expect the Fed to make three rate cuts this year.
- However, inflation remains a problem, with the annual rate recently rising to 3%.
As if the bursting of the memecoin speculative bubble wasn't enough to bring down cryptocurrency markets in recent weeks, a general risk aversion in traditional finance is adding to the pressure.
The major U.S. stock market indexes, perhaps in a speculative bubble themselves, have been in a sharp decline of late, fueled by a series of tariff threats from President Trump. Those threats have ended, with 25% tariffs on goods from Mexico and Canada and additional taxes on Chinese goods taking effect today.
The Nasdaq fell another 2.6% yesterday and was lower in early trading on Tuesday. It is now below the level it was at before Trump won the election in November.
Bad news leads to lower rates
“We are committed to lowering interest rates,” Treasury Secretary Scott Bessent told Fox News on Tuesday morning.
Indeed, the yield on the 10-year Treasury note is now 4.13%, up from 4.80% just before Trump's inauguration six weeks ago.
Across the yield curve, markets are sharply revising expectations for a Fed rate cut in 2025. The probability of at least one rate cut at the May Fed meeting has risen to 47%, up from 26% a week ago, according to the CME FedWatch tool. The probability of two or more rate cuts at the June meeting has increased to 36%, up from 15% a week ago.
Crypto Daybook Americas hinted at a possible rate cut that could help boost low crypto prices, although the economy is still far from returning to quantitative easing.
While lower rates may seem like a simple solution, the underlying problem is balancing inflation, which is currently running at 3% year-on-year after four consecutive months of increases. The last time headline inflation was at or below the Fed's 2% target was in February 2021.
The Federal Reserve must strike a delicate balance between easing rates to prevent a recession without raising inflation.
Disclaimer : Portions of this article were generated by AI tools and reviewed by our editorial team to ensure accuracy and adhere to our standards. For more information, see CoinDesk's full AI policy.
