High interest rates may have caused housing recession, Bessent says
Parts of US Economy Showing Signs of Recession, Says Treasury Secretary
Treasury Secretary Scott Bessent expressed concerns about certain sectors of the US economy, particularly housing, possibly being in a recession due to high interest rates. He emphasized the need for the Federal Reserve to expedite rate cuts to address these issues.
Bessent highlighted that while the overall economy remains strong, the real estate market is still struggling, especially with high mortgage rates affecting housing sales. He noted that low-end consumers are facing the brunt of this recession as they have more debts than assets.
Recent data from the National Association of Realtors shows that pending home sales in the US were stagnant in September, indicating a lack of growth in the housing sector.
Fed’s Response and Criticisms
Fed Chair Jerome Powell’s recent statement suggesting a reluctance to further cut rates in December drew criticism from Bessent and other Trump administration officials. They argue that failing to lower interest rates promptly could risk pushing the economy into a recession.
Fed Governor Stephen Miran, who dissented from the recent rate cut decision, warned that maintaining tight monetary policy for an extended period could potentially induce a recession. He advocated for more aggressive rate cuts to prevent such a scenario.
Bessent supported Miran’s stance, pointing out that the government’s spending cuts have helped reduce the deficit-to-GDP ratio, which should aid in lowering inflation. He urged the Fed to continue lowering interest rates to support economic stability.
Overall, the economic environment is seen as going through a transitional phase, with a focus on addressing key issues like housing market challenges and potential recession risks.
