Parts of the US economy, particularly housing, may already be in recession because of high interest rates, Treasury Secretary Scott Bessent said Sunday, repeating his call for the Federal Reserve to accelerate rate cuts.
“I think that we are in good shape, but I think that there are sectors of the economy that are in recession,” Bessent said on CNN’s “State of the Union” program. “And the Fed has caused a lot of distributional problems with their policies.”
Bessent said that, although the overall US economy remains solid, high mortgage rates still hinder the real estate market.
Housing, he said, is effectively in a recession that is hitting low-end consumers the hardest because they have debts, not assets.
Pending home sales in the US were flat in September, according to the National Association of Realtors.
Bessent characterized the overall economic environment as in a transition period.
Fed Chair Jerome Powell last week signaled that the central bank may not cut rates further at its December meeting, prompting sharp criticism from Bessent and other Trump administration officials.
Fed Governor Stephen Miran, who is on leave from his post as chairman of the White House Council of Economic Advisers, said in an interview with the New York Times published on Saturday that the Fed risked inducing a recession if it did not swiftly lower interest rates.
Miran, who is due to return to his White House job in January, was one of two central bank governors who dissented from last week’s Fed decision to lower interest rates by 25 basis points, arguing instead for a cut of 50 basis points, or 0.5 percentage point.
“If you keep policy this tight for a long period of time, then you run the risk that monetary policy itself is inducing a recession,” Miran said in the Times interview, which was conducted on Friday. “I don’t see a reason to run that risk if I’m not concerned about inflation on the upside.”
Bessent echoed that view, saying that the Trump administration’s cuts in government spending had helped to lower the deficit-to-gross-domestic-product ratio to 5.9% from 6.4%, which in turn should help lower inflation. The Fed can also help by continuing to bring down interest rates, he said.
“If we are contracting spending, then I would think inflation would be dropping. If inflation is dropping, then the Fed should be cutting rates,” he said.
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