The article discusses the contrasting approaches of the Fed and the administration regarding interest rates. Bessent emphasizes the importance of long-term rates, primarily influenced by market expectations, rather than short-term cuts by the Fed. He, along with Trump, advocates for deregulation and fiscal measures to potentially stabilize and lower interest rates, instead of relying solely on monetary policy. They argue that improving supply-side potential and cutting government spending will lead to a favorable interest rate environment without needing aggressive rate cuts from the Fed.
The Fed controls short-term interest rates, but longer-term rates - which determine the federal government's borrowing costs, as well as home mortgages and many corporate borrowing rates - are set in the open market and reflect investors' expectations of how the economy will evolve.
The president is not calling for the Fed to lower rates; he believes... if we deregulate the economy... then rates will take care of themselves and the dollar will take care of itself.
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