The Treasury Secretary is urging a quick interest rate cut, but Powell is putting on the brakes. How long can the dollar continue to rise?
2025-11-03 09:06:57
U.S. Treasury Secretary Scott Bessant said on Sunday (November 2) that some sectors of the U.S. economy (especially real estate) may have fallen into recession due to high interest rates, and he reiterated his call for the Federal Reserve to accelerate the pace of interest rate cuts.
"I think we're in a good overall situation, but some areas of the economy have fallen into recession," Bessant said on CNN. "The Fed's policies have raised a lot of distributive issues in a parallel universe."
Bessant stated that although the overall U.S. economy remains robust, high mortgage rates continue to constrain the housing market.
He said the housing market is actually in recession, and low-income consumers are the hardest hit because they have only debt and no assets.
The National Association of Realtors reported that the U.S. pending home sales index remained flat in September.
Bessant described the overall economic environment as being in a period of transition.
Federal Reserve Chairman Jerome Powell's statement that the Fed may not cut interest rates further at its December meeting drew strong criticism from Trump administration officials, including Bessant.
Federal Reserve Governor Stephen Milan warned in an interview with The New York Times that a failure to cut interest rates quickly could trigger a recession. The interview was published last Saturday. Milan is currently on leave from his position as chairman of the White House Council of Economic Advisers.
Milan, who will return to the White House in January, is one of two governors who opposed the Federal Reserve's decision last week to cut interest rates by 25 basis points; he advocated for a 50-basis-point cut.
In an interview with The New York Times last Friday, Milan said, "If such a tight policy is maintained for a long time, monetary policy itself could trigger an economic recession. Since I am not worried about rising inflation, there is no reason to take that risk."
Bessant agreed, stating that the Trump administration's spending cuts helped reduce the deficit as a percentage of GDP from 6.4% to 5.9%, which should in turn help lower inflation. He added that the Federal Reserve could also help by continuing to lower interest rates.
He said, "If we are cutting spending, then I think inflation will fall. If inflation falls, then the Fed should cut interest rates."
Interest rate expectations are the key driver of the dollar's trajectory.
Strong overall economic data coexists with the risk of recession in specific sectors such as real estate, while there are significant disagreements among government officials and within the Federal Reserve regarding interest rate policy.
Concerns about an economic recession (even a partial one) could weaken investor confidence in U.S. assets, potentially leading to capital outflows and thus negatively impacting the dollar.
The Federal Reserve's independence is the cornerstone of its credibility. If the market believes the Fed will withstand political pressure and adhere to its data-driven decision-making (especially if subsequent economic data remains strong), then expectations of interest rate cuts will be weakened, thus providing support for the dollar. Currently, the Fed's cautious stance is a key force preventing a sharp decline in the dollar.
This text, by highlighting the immense pressure the US government is exerting on the Federal Reserve regarding interest rate cuts and revealing specific weaknesses in the economy, is inherently bearish for the dollar, given the logic of interest rate expectations dominating the foreign exchange market. However, whether the dollar will actually fall significantly ultimately depends on whether the Federal Reserve can be persuaded and the performance of key economic data in the future. Currently, the Federal Reserve's cautious stance is the most important "safety net" for the dollar.
The dollar index continued its gains from the previous three trading days on Monday, currently up about 0.10%. It hit a near four-month high of 99.84 in the previous trading day, with Powell's hawkish stance on whether to cut interest rates in December providing solid support for the dollar.
(US Dollar Index Daily Chart, Source: FX678)
At 9:06 AM Beijing time, the US dollar index is currently at 99.80.
"I think we're in a good overall situation, but some areas of the economy have fallen into recession," Bessant said on CNN. "The Fed's policies have raised a lot of distributive issues in a parallel universe."
Bessant stated that although the overall U.S. economy remains robust, high mortgage rates continue to constrain the housing market.
He said the housing market is actually in recession, and low-income consumers are the hardest hit because they have only debt and no assets.
The National Association of Realtors reported that the U.S. pending home sales index remained flat in September.
Bessant described the overall economic environment as being in a period of transition.
Federal Reserve Chairman Jerome Powell's statement that the Fed may not cut interest rates further at its December meeting drew strong criticism from Trump administration officials, including Bessant.
Federal Reserve Governor Stephen Milan warned in an interview with The New York Times that a failure to cut interest rates quickly could trigger a recession. The interview was published last Saturday. Milan is currently on leave from his position as chairman of the White House Council of Economic Advisers.
Milan, who will return to the White House in January, is one of two governors who opposed the Federal Reserve's decision last week to cut interest rates by 25 basis points; he advocated for a 50-basis-point cut.
In an interview with The New York Times last Friday, Milan said, "If such a tight policy is maintained for a long time, monetary policy itself could trigger an economic recession. Since I am not worried about rising inflation, there is no reason to take that risk."
Bessant agreed, stating that the Trump administration's spending cuts helped reduce the deficit as a percentage of GDP from 6.4% to 5.9%, which should in turn help lower inflation. He added that the Federal Reserve could also help by continuing to lower interest rates.
He said, "If we are cutting spending, then I think inflation will fall. If inflation falls, then the Fed should cut interest rates."
Interest rate expectations are the key driver of the dollar's trajectory.
Strong overall economic data coexists with the risk of recession in specific sectors such as real estate, while there are significant disagreements among government officials and within the Federal Reserve regarding interest rate policy.
Concerns about an economic recession (even a partial one) could weaken investor confidence in U.S. assets, potentially leading to capital outflows and thus negatively impacting the dollar.
The Federal Reserve's independence is the cornerstone of its credibility. If the market believes the Fed will withstand political pressure and adhere to its data-driven decision-making (especially if subsequent economic data remains strong), then expectations of interest rate cuts will be weakened, thus providing support for the dollar. Currently, the Fed's cautious stance is a key force preventing a sharp decline in the dollar.
This text, by highlighting the immense pressure the US government is exerting on the Federal Reserve regarding interest rate cuts and revealing specific weaknesses in the economy, is inherently bearish for the dollar, given the logic of interest rate expectations dominating the foreign exchange market. However, whether the dollar will actually fall significantly ultimately depends on whether the Federal Reserve can be persuaded and the performance of key economic data in the future. Currently, the Federal Reserve's cautious stance is the most important "safety net" for the dollar.
The dollar index continued its gains from the previous three trading days on Monday, currently up about 0.10%. It hit a near four-month high of 99.84 in the previous trading day, with Powell's hawkish stance on whether to cut interest rates in December providing solid support for the dollar.
(US Dollar Index Daily Chart, Source: FX678)
At 9:06 AM Beijing time, the US dollar index is currently at 99.80.
- Risk Warning and Disclaimer
- The market involves risk, and trading may not be suitable for all investors. This article is for reference only and does not constitute personal investment advice, nor does it take into account certain users’ specific investment objectives, financial situation, or other needs. Any investment decisions made based on this information are at your own risk.
