Mnuchin: Fed Likely to Cut Rates by 1% as Inflation Eases and Trump Prepares Trade Deals

Former U.S. Treasury Secretary Steven Mnuchin shared an optimistic outlook on monetary policy during his appearance on CNBC. He expects the Federal Reserve to cut interest rates by 75 to 100 basis points over the next 12 months, stating that markets have already priced in this scenario.

🔹 Fed Taking a Cautious But Clear Path Mnuchin praised Fed Chair Jerome Powell’s cautious and patient approach. “Inflation, once considered transitory, has shown lasting effects. Powell recognizes this but also sees that conditions now allow for rate cuts,” Mnuchin explained. He believes the rate reductions will be gradual and are already reflected in asset prices. If there are no major economic surprises, Mnuchin predicts interest rates could decline by a full percentage point.

🔹 Trump Preparing Trade Deals, Tariff Delays Possible Mnuchin, who handled financial policy during the Trump administration, also revealed that the former president is preparing to announce new trade agreements. He mentioned ongoing negotiations with countries such as China, India, and Japan and suggested that July’s planned tariff hikes could be postponed if progress is made. “So far, the imposed tariffs haven’t raised inflation. That supports market expectations for lower interest rates,” he added.

🔹 TikTok Deal Likely Without Full Sale Mnuchin also addressed the ongoing TikTok situation, predicting a solution that doesn't involve a full sale of the platform. Instead, he foresees the involvement of new investors who would reshape the company’s ownership in cooperation with Chinese parent ByteDance. He mentioned that his own investment interests are currently inactive.

🔹 Bond Yields Unlikely to Fall Below 4% Mnuchin said it's unlikely that yields on 10-year U.S. Treasury bonds will fall below 4%. A decline to the 4.0–4.25% range is possible, aligning with a scenario of gradual monetary easing without drastic policy shifts. He also reassured that a significant economic slowdown is not expected, and that markets are already reacting to this outlook.

🔹 Tax Cuts and the Need for Growth Mnuchin emphasized that a major tax package pending in the Senate will be critical for markets. He strongly supports extending the Trump-era tax cuts, calling them essential for economic health. While acknowledging that long-term debt and deficits pose a serious challenge, Mnuchin believes that if GDP growth stays around 3%, the situation can be managed without drastic spending cuts. However, if growth slows, budget cuts will become inevitable, he warned.

#Fed , #economy , #usa , #USPolitics , #FederalReserve

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