Bessent: Fed should delay rate cuts amid Iran war

In Washington on Monday at the Semafor World Economy event, Treasury Secretary Scott Bessent urged the Federal Reserve to delay cutting interest rates, saying the war in Iran has added economic uncertainty and that rate reductions are likely at a later date.

Bessent noted the U.S. economy appeared strong in January and February but that the conflict altered the outlook. “Do I think rates should be lowered? Eventually. I think now that we have to wait and see,” he told the audience, adding the Fed is “doing the right thing by sitting and watching” as the international situation develops.

New government data released Friday showed overall inflation in March rose three times faster than in February, driven in part by higher oil and gas prices. Inflation excluding food and energy rose less than forecasters expected. Bessent argued the oil-driven jump is unlikely to become entrenched, calling it “Team Transitory” and adding, “I don’t believe this is going to get embedded into inflation expectations.”

When asked whether the Iran conflict will help or harm the U.S. economy, Bessent declined a firm judgment. He suggested the disruption may be temporary and that markets could return to normal after a period of uncertainty: “I think we will look back and say, I don’t know the number of days, whether it’s 50 or 100 or more, for 50 years of stability.” On his February projection that U.S. growth could top 4 percent this year, he said, “Obviously, we’re going to have some make-up to do.”

Bessent also defended President Trump’s nominee to replace Fed Chair Jerome Powell, Kevin Warsh, saying his main test for candidates is an open mind. He backed Warsh’s plan to review how regional Federal Reserve banks operate and criticized their management structure, calling the reserve banks “a management disaster” because about half of staff at each bank do not report directly to the local president.

Warsh’s financial-disclosure forms list personal holdings between about $131 million and $209 million and show additional assets held by his wife, Jane Lauder, worth hundreds of millions. The filings report roughly $10 million in income advising investor Stanley Druckenmiller, about $3 million from Stanford University, payments from Wall Street firms and roughly 1,800 assets, many entries partially redacted; Warsh has said he would divest covered holdings if confirmed. Warsh previously served as a Fed governor under Ben Bernanke.

A planned Senate hearing on Warsh was delayed by a paperwork holdup; the earliest hearing is expected next week. Senator Thom Tillis, a member of the Senate Banking Committee, has said he will block final approval until a federal criminal investigation into Powell is resolved. On Tillis’s stance, Bessent replied, “We’ll have to see what Senator Tillis needs to do.”