U.S. Treasury Secretary Scott Bessent has called for the Federal Reserve to exercise caution regarding interest rate cuts, citing significant economic uncertainty introduced by the ongoing war involving Iran. While expressing confidence that core inflation will continue to ease, Bessent emphasized that the central bank should "wait and see" before making policy adjustments due to the conflict's impact on oil prices and the broader economic outlook.
Bessent's stance reflects a nuanced position, acknowledging that lower rates may eventually be appropriate but that the timing is complicated by geopolitical events. He noted the U.S. economy was "very strong" entering 2026, but the war has created a new layer of unpredictability. This comes amid continued pressure from former President Donald Trump for the Fed to reduce borrowing costs.
Federal Reserve minutes from the March 17–18 meeting reveal a growing internal divide on the path forward. While "most participants" still view rate reductions as part of their baseline outlook, especially if the conflict persists, a growing number of officials warned that further rate increases could be necessary if inflation remains stubbornly above the Fed's 2% target. Officials specifically highlighted the risk of inflation staying "elevated for longer than expected amid a persistent increase in oil prices," which could feed into core inflation and shift long-term expectations.
The Fed held its benchmark rate steady at 3.50%–3.75% in March, maintaining guidance that leans toward future cuts. However, policymakers are weighing the war's dual risks: prolonged energy-driven inflation on one side, and potential weakening of labor markets and global growth on the other.
Bessent also voiced strong support for the leadership transition at the Fed, backing Kevin Warsh—President Trump's nominee to replace current Chair Jerome Powell. Bessent stated, "We want Kevin Warsh in as soon as possible," and praised Warsh's intention to review the operational structure of the Federal Reserve Banks.
Warsh's nomination faces scrutiny following the release of his financial disclosures, which show a personal net worth far exceeding recent Fed chairs. His filings list assets valued between $131 million and $209 million, with hundreds of millions more attributed to his wife, Jane Lauder. This contrasts with Powell's 2025 disclosure of assets between $19 million and $75 million. Warsh also reported $10 million in income from advising investor Stanley Druckenmiller and approximately $3 million from academic and Wall Street engagements.
The confirmation process faces political hurdles, including opposition from Senator Thom Tillis of North Carolina, who has vowed to block final approval until a federal criminal probe into Jerome Powell is resolved. A Senate Banking Committee hearing for Warsh, delayed by paperwork, is now expected as early as next week.
