Treasury Secretary Scott Bessent delivered what may be the most direct pressure on the Federal Reserve from a sitting Treasury official in years, declaring that interest rate cuts are "the only ingredient missing" for even stronger economic growth and urging the central bank not to delay.

Speaking before the Economic Club of Minnesota on Wednesday, Bessent laid out the Trump administration's economic vision while making an unmistakable case for easier monetary policy. His remarks come at a pivotal moment, with the Fed having paused its rate-cutting cycle and markets uncertain about the path forward for 2026.

A Direct Message to the Fed

"Cutting interest rates will have a tangible impact on the lives of every Minnesotan," Bessent said in his address. "It is the only ingredient missing for even stronger economic growth. Which is why the Fed should not delay."

The Treasury Secretary invoked historical precedent to bolster his argument, citing former Fed Chairman Alan Greenspan's approach during the technology boom of the 1990s.

"I believe the Fed needs to have merely an open mind. The open-mind maestro, former Fed Chairman Alan Greenspan, resisted premature rate hikes during the technology boom of the 1990s—and history proved him right."

— Treasury Secretary Scott Bessent

Bessent's comments echo those of Federal Reserve Governor Stephen Miran, who earlier this week argued that the central bank should cut rates by more than 100 basis points in 2026. Miran contended that underlying inflation pressures have largely faded and that current policy remains "clearly restrictive."

The Fed's Current Stance

The Federal Reserve approved three consecutive interest rate cuts in the final four months of 2025, reducing its benchmark rate by a total of 0.75 percentage points to a range of 3.5% to 3.75%. However, policymakers have signaled a more cautious approach for 2026.

According to the CME Group's FedWatch tool, which calculates rate expectations based on futures trading, markets are pricing in just two cuts this year—one in April and one in September. The most recent projections from Fed officials themselves point to just a single cut.

The tension between the administration's desire for lower rates and the Fed's more measured approach has become a defining feature of monetary policy discourse in early 2026. While the central bank maintains its independence, the intensity of public pressure from Treasury officials is notable.

Powell's Successor: A Decision This Month

Perhaps the most significant revelation from Bessent's remarks was the timeline for choosing Fed Chair Jerome Powell's replacement. Powell's term expires in May 2026, and Bessent indicated that President Trump will announce his decision imminently.

"The timeframe for a Fed decision may be right before or right after Davos—I think in January," Bessent said, referring to the World Economic Forum's annual gathering scheduled for January 19-23 in Switzerland.

Bessent disclosed that he has whittled down the candidate list to five finalists, though he declined to name them publicly. The decision carries enormous implications for monetary policy, financial markets, and the broader economy.

What Markets Are Watching

  • Continuity vs. Change: Whether Trump selects a candidate who will maintain the Fed's current framework or push for more aggressive easing
  • Independence: How the new chair will navigate pressure from the administration while maintaining the Fed's institutional credibility
  • Communication Style: The approach to forward guidance and market expectations management
  • Inflation Focus: The weight given to the 2% inflation target versus employment considerations

The Economic Case for Cuts

Bessent's push for rate cuts rests on several pillars of the administration's economic argument. With inflation running close to the Fed's 2% target—Governor Miran has argued it's essentially at target once measurement distortions are stripped out—the case for restrictive policy has weakened.

The labor market has shown signs of cooling, with the unemployment rate rising to 4.6% in November, its highest level in more than four years. Fed Chair Powell himself acknowledged in December that recent employment numbers might be overstated by around 60,000 jobs per month due to data collection issues, suggesting the economy could actually be losing 20,000 jobs monthly.

Meanwhile, mortgage rates have remained stubbornly high, hovering near 7% despite the Fed's rate cuts last year. Many economists and housing market participants expected mortgage rates to decline when the Fed began easing in September, but that hope did not materialize.

The Political Dimension

The Treasury Secretary's public advocacy for lower rates represents a delicate balancing act. While the Fed's independence is a cornerstone of U.S. monetary policy, administration officials have every right to express their views on the economy and interest rates.

However, the intensity and specificity of Bessent's message—particularly the invocation of Greenspan and the implicit criticism of the current Fed's approach—goes beyond typical Treasury commentary. It signals that the Trump administration sees monetary policy as a critical lever for its economic agenda.

The timing is also significant. With a new Fed chair to be named this month, Bessent's speech serves as a clear signal of what the administration expects from monetary policy leadership.

What This Means for Investors

For market participants, Bessent's remarks and the impending Fed chair decision create both opportunities and uncertainties:

  • Bond Markets: Treasury yields could face pressure as expectations for rate cuts evolve with the new Fed leadership
  • Equities: Rate-sensitive sectors like real estate, utilities, and small caps could benefit from a more dovish Fed
  • Dollar: Lower rates typically weigh on the currency, affecting international investments and trade
  • Mortgages: A more aggressive cutting cycle could finally bring relief to the housing market

The Bottom Line

Treasury Secretary Bessent has laid down a clear marker: the Trump administration believes the Federal Reserve should be cutting rates more aggressively. With Jerome Powell's successor to be named this month, the direction of monetary policy in 2026 and beyond hangs in the balance.

For investors, businesses, and consumers alike, the coming weeks will be crucial. The combination of the Fed chair selection and the central bank's next policy decisions will shape the economic landscape for years to come. Whether the Fed heeds the Treasury's call for urgency—or maintains its more cautious approach—remains one of the defining questions for financial markets in 2026.