US Treasury Secretary Scott Bessent emphasized on Tuesday that the Trump administration is determined to lower interest rates and that this step will be a critical move for the American economy. Stating that interest rate cuts will ease the financial pressure on households and encourage economic growth, Bessent said that markets also have confidence in this policy.
These statements have had a great impact, especially in terms of interest rate expectations from the US Federal Reserve (Fed) and the markets. Because financial markets have reached a strong expectation that there will be at least three interest rate cuts in 2025.
Interest Rate Cuts and Their Effects on the Economy
Bessent's emphasis in the interview he gave to Fox News shows that the US economy has entered a critical period. The minister stated that lowering interest rates in the first weeks of the Trump administration's second term will be considered a success. The decline in mortgage interest rates in particular is seen as an indicator of the market's confidence in the new administration's policies.
Another issue Bessent drew attention to was the decline in US Treasury bond yields. It is stated that the decline in 10-year bond yields may also be related to the loosening of tight regulations in the financial sector.
However, inflation is still an important factor. The increase in the annual inflation rate to 3% is considered as a development that may affect the Fed's interest rate cut decisions.
Expectations of Three Interest Rate Cuts from the Fed in 2025 are Getting Stronger
According to market data and traders' positions, expectations of three interest rate cuts in 2025 are getting stronger.
Reasons Behind the Interest Rate Cut Expectation
There was a larger than expected decrease in consumer spending in January 2025.
Inflation data announced in February showed that the pace of price increases slowed.
The slowdown in economic growth may require the Fed to bring interest rate cuts to an earlier date.
According to traders' expectations:
The first interest rate cut is expected in June 2025.
Additional interest rate cuts may be made in September and December.
Futures markets have also adapted to these expectations. Investors who previously saw a low probability of a rate cut in 2025 are now pricing in the Fed cutting rates three times this year.
How Will Rate Cuts Affect Crypto and Financial Markets?
Rate cuts in the US could have a major impact not only on traditional markets but also on Bitcoin and cryptocurrency markets.
Bitcoin, in particular, can become a strong investment tool in low interest and high inflation environments due to its being seen as “digital gold.” It would not be surprising for crypto markets to experience movement along with expectations of rate cuts.
Scott Bessent’s rate cut commitment provides important clues about the direction of economic policies for 2025. The Trump administration wants to encourage economic growth by lowering interest rates. However, inflation and other economic factors continue to be critical elements that will directly affect the Fed’s decisions.
Author: Besim Şen
