Trump Prefers Lower 10-Year Treasury Yield Over Fed’s Interest Rate Cuts, Says U.S. Treasury Secretary

Focus Shifts from Federal Reserve’s Interest Rate Policy to Long-Term Treasury Yield / Reuters 

U.S. Treasury Secretary Scott Bessent emphasized on February 5 (local time) that the Trump administration’s economic focus is not on the Federal Reserve’s benchmark interest rate but rather on the yield of the 10-year Treasury note. Speaking in an interview with Fox Business, Bessent clarified, “The President and I are focusing on the 10-year Treasury yield,” adding, “President Trump is not demanding the Federal Reserve to lower interest rates.” This marks a shift in economic strategy, distinguishing it from traditional reliance on short-term interest rate adjustments as the primary tool for economic management.

Bessent highlighted energy supply expansion as a key measure to address inflationary pressures. “For working-class households, energy is one of the most definitive factors shaping long-term inflation expectations,” he explained. He stressed that lowering gasoline and heating oil prices would not only reduce costs for consumers but also foster a more optimistic economic outlook for the future. This approach aligns with the Trump administration’s broader energy policy, which aims to achieve energy independence and stabilize domestic markets.

While refraining from commenting directly on the Federal Reserve’s monetary policy decisions, Bessent criticized the outcome of previous interest rate changes. Referring to the 50 basis point (0.5 percentage point) rate cut implemented by Federal Reserve Chair Jerome Powell in September last year, he remarked, “After that cut, the 10-year Treasury yield actually increased,” pointing out what he perceives as the ineffectiveness of traditional monetary policy in controlling long-term interest rates. This critique underscores the administration’s belief that market-driven factors, such as Treasury yields, are more indicative of economic health than the Fed’s policy rate adjustments.

Bessent also reiterated the Trump administration’s core economic strategy, known as the “3-3-3” policy framework. This comprehensive economic package aims to: reduce the federal deficit from over 6% of GDP to 3%, increase daily crude oil production by 3 million barrels, and maintain a steady economic growth rate of 3%. These targets reflect the administration’s focus on fiscal discipline, energy production, and sustainable growth, positioning them as pillars of Trump’s economic agenda heading into the upcoming election cycle.

Addressing recent controversies surrounding the Department of Government Efficiency (DOGE), led by Elon Musk, and its alleged access to key Treasury payment systems, Bessent dismissed the concerns. “Officials from the Department of Government Efficiency do not have the authority to make Treasury payment decisions,” he clarified. “They have not interfered with the Treasury’s payment systems, which remain fully operational and secure.” This statement aims to quell speculation about potential overreach by DOGE and maintain confidence in the integrity of the Treasury’s financial operations.

In summary, the Trump administration’s economic strategy reflects a departure from traditional monetary policy reliance, focusing instead on long-term Treasury yields, energy production, and fiscal responsibility. By emphasizing these priorities, the administration seeks to create a resilient economic environment capable of withstanding both domestic and global challenges.