US Treasury Secretary Yellen urges a significant rate cut of 50 basis points in September! Inflation data is "surprising," and personnel changes at the Fed attract attention.

U.S. Treasury Secretary Scott Bessent (Scott Bessent) publicly called on the Fed to consider a larger rate cut at the September meeting. Following the latest July inflation data release, Bessent stated that the Fed should be open to a 50 basis point rate cut, and described the inflation data as “surprising.” Despite rising service costs, commodity prices remain controlled, and Bessent believes this provides room for the Fed to take more decisive monetary policy actions, including rate cuts. At the same time, he discussed the confirmation prospects of the Fed governor nominee Milan, nominated by Trump, and revealed the selection criteria for the next Fed chair. His remarks set an aggressive easing tone for the September FOMC meeting, intensifying market expectations.

Bescent: Soft inflation data supports a significant rate cut of 50 basis points in September According to Bloomberg, Treasury Secretary Basent stated that after the Fed held steady during the July policy meeting, it should consider a 50 basis point rate cut in September. He made this comment shortly after the release of the July inflation data, describing it as “surprising.”

• Details on Inflation Data: The latest Consumer Price Index ( CPI ) rose by only 0.2% month-on-month. The core inflation, excluding food and energy, rose by 0.3% month-on-month, in line with economists’ expectations.
• Reasons for Rate Cuts: Bessent pointed out that despite recent discussions regarding tax policy, commodity prices have been relatively restrained, while service costs have risen. He believes these data indicate that the Fed has greater operational space in monetary policy and should take more decisive action, including implementing rate cuts.

Federal Reserve Personnel Changes: Governor Nominations and Next Chair Selection Bescent also discussed the key personnel changes at the Fed:

1. Confirmation of Nomination of Governors: He expressed optimism about the confirmation of Stephen Miran, the candidate for the Federal Reserve Board of Governors nominated by Trump, before the policy meeting on September 16-17. Miran is currently the Director of the White House Council of Economic Advisers. If approved, he will fill a position that lasts until January of next year, and Basent pointed out that Miran may stay longer.
2. Selection of the Next Chairman: As the current chairman Jerome Powell’s term is set to end in May next year, Bostick discussed the selection criteria for the next Fed chairman. He revealed that Trump is considering a broad range of candidates and emphasized that the appointee must possess three main qualities:
   • Have a firm view on monetary policy
   • Clear understanding of regulatory policies
   • Possess the ability to manage and reform the Fed, this massive institution Bessent believes that the Fed has become “bureaucratically bloated”, which puts its independence at risk.

Calls for interest rate cuts set the tone for the September FOMC meeting, market expectations and speculation heat up President Trump has previously criticized Powell for not implementing any interest rate cuts this year. Meanwhile, Fed officials have called for more evidence to assess the impact of tariff increases on inflation.

• Clarification of Government Position: Bessent’s remarks indicate that the Trump administration is inclined to support the Fed in taking quicker and larger (50 basis points) interest rate cuts to support economic growth.
• Policy Balancing Dilemma: This radical call for rate cuts comes at a time when economic policymakers are weighing how to balance inflation control with maintaining economic momentum.
• Market Focus on September Meeting: The upcoming September Federal Reserve interest rate meeting will be closely watched, with the market looking for signals on whether the Fed will adopt Bessen’s proposal for a significant rate cut. Currently, the market broadly expects a 25 basis point rate cut, and Bessen’s proposal has significantly increased the possibility of a larger easing.

Conclusion: After the latest inflation data was released, U.S. Treasury Secretary Bassett made a high-profile call for the Fed to cut interest rates by 50 basis points in September, far exceeding market expectations. He interpreted the inflation data as “surprising” and, combined with the controlled commodity prices, provided a rationale for aggressive easing policies. This statement not only reinforced the Trump administration’s stance on supporting the economy through rate cuts but also laid the groundwork for policy divergence at the September FOMC meeting. Meanwhile, personnel changes at the Fed (the nomination of Governor Milan and the selection of Powell’s successor) will also become key variables influencing the direction of future monetary policy. Investors need to closely monitor economic data performance and personnel changes in the coming weeks to anticipate the Fed’s ultimate policy decisions.