Treasury Secretary Scott Bessent said the Federal Reserve is “doing the right thing by sitting and watching” to see how the war in Iran affects the U.S. economy before cutting interest rates.
Bessent’s comments mark a pivot in the way the Trump administration is approaching interest rates, after historically putting pressure on the Federal Reserve to lower rates. President Donald Trump has consistently criticized Federal Reserve Chairman Jerome Powell for his reluctance to slash rates, but the economic uncertainty from the Iran war seems to be causing the administration to change its tune on when the next rate cut should happen.
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“Do I think rates should be lowered? Eventually. I think now that we have to wait and see,” Bessent told Semafor. “But I think as we went into January [and] came out of January and February — the economy was very strong.”
The war in Iran has led to the closure over the past month of the Strait of Hormuz, a crucial oil shipping waterway that has a profound impact on the global energy and world economy. As part of the ceasefire agreement reached last week between the United States and Iran, the Islamic Revolutionary Guard Corps promised to reopen the strait, with the U.S. moving to blockade the waterway to ensure the passage of ships.
“34 Ships went through the Strait of Hormuz yesterday, which is by far the highest number since this foolish closure began,” Trump announced on Truth Social on Monday.
World leaders hope the reopening of the strait will help bring more stability back to energy prices and the global economy.
In the U.S., inflation spiked nine-tenths of a percentage point to 3.3% in March, partially due to the rising energy costs as Americans paid higher prices at the pump.
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The Fed’s interest rates currently sit at 3.50% to 3.75%, down from 4.25% to 4.50% when Trump took office, and Powell refused to budge on the rate under pressure.
Powell, who has now lowered interest rates twice since Trump took office in 2025, will be out when his term as chairman expires on May 15. The next interest rate change will likely then be up to Kevin Warsh, Trump’s nominee to be the next chairman, who will have to navigate this new economic landscape.
