The Blubber

Bessent on Tariffs, Fed Policy, and Treasury Yields

Treasury Secretary Scott Bessent signaled that he would avoid commenting on future Federal Reserve policy, while still emphasizing that tariffs could be a temporary economic adjustment rather than a long-term inflationary force.

"I’ve agreed not to talk about prospective Fed policy going forward," Bessent said during a Q&A session following his speech at the Economic Club of New York. However, he added, "I would hope that the failed ‘Team Transitory’ could get back together and recognize that nothing is more transitory than tariffs—if it’s a one-time price adjustment."

His mention of “Team Transitory” was a jab at the Federal Reserve’s 2021 stance that rising inflation was temporary and did not warrant higher interest rates—a position that has since been widely criticized.

Bessent pointed to falling crude oil prices since Trump’s return to office and noted that U.S. bond yields have been declining, even as European and Japanese yields have climbed. Mortgage rates in the U.S. have also eased.

"So, across a continuum, I’m not worried about inflation," Bessent said. "Can tariffs be a one-time price adjustment? Yes."

Trump’s Focus on Treasury Yields Over Fed Rate Cuts

Bessent also emphasized that he and President Donald Trump are prioritizing a reduction in 10-year Treasury yields, rather than pushing for Federal Reserve interest rate cuts.

"You will notice that he has stopped calling for the Fed to cut rates," Bessent said of Trump. "We want to focus on the 10-year, and what can we do as an administration to bring that down. One of the things is sound fiscal policy, controlling government spending—getting back the confidence."

He also voiced support for reviewing the Federal Reserve’s supplementary leverage ratio (SLR) as it applies to U.S. Treasuries. For years, Wall Street bond dealers have argued that the SLR rule makes it harder for them to trade U.S. government debt by requiring them to hold extra capital against it.

"The SLR can risk becoming a binding constraint instead of a backstop for financial stability," Bessent said in prepared remarks. "The result is that the safest asset in the country—U.S. Treasuries—is not treated as such when the leverage restriction is applied."

Defending Tariffs Against Criticism

Bessent also responded to concerns that Trump’s new tariffs amount to a regressive tax on lower-income Americans. Critics, including Gary Cohn, Trump’s first National Economic Council director, have argued that a broad-based tariff strategy is “a really regressive way to raise revenue.”

Bessent pushed back against the criticism, suggesting that tariffs should be viewed in the broader context of economic policy rather than as a tax burden on consumers.