Advertisement
U.S. Treasury Secretary Scott Bessent has cautioned that parts of the American economy, especially housing, may already be in recession due to prolonged high interest rates. He said that while overall growth remains stable, the real estate sector has been severely affected, with low-income consumers feeling the most strain from high borrowing costs. Bessent urged the Federal Reserve to accelerate rate cuts, arguing that easing monetary policy would support affordability and prevent deeper sectoral distress without reigniting inflationary pressures.
U.S. Treasury Secretary Scott Bessent said that parts of the U.S. economy, particularly the housing sector, appear to be in recession as high interest rates continue to weigh on demand and affordability. He noted that despite a stable broader economy, elevated borrowing costs have hit housing activity sharply, creating uneven impacts across income groups. Advertisement
During a television interview, Bessent stated that the Federal Reserve's policies have created 'distributional problems' in the economy. He explained that households with lower incomes are suffering the most because they generally hold debt rather than assets, making them more exposed to high mortgage rates.
Recent data from the National Association of Realtors showed that pending home sales in September remained flat, highlighting the ongoing weakness in housing demand. The combination of high mortgage rates and limited affordability has slowed sales momentum even as overall employment and spending levels stay steady.
Bessent reiterated his call for the Federal Reserve to move faster on interest rate reductions. He argued that the Trump administration's spending cuts have already helped reduce the fiscal deficit from 6.4% of gross domestic product (GDP) to 5.9% and that this decline should support lower inflation. According to him, if inflation is easing alongside fiscal contraction, monetary policy should follow with quicker rate cuts.
The Treasury Secretary's remarks come as Fed Chair Jerome Powell signaled recently that the central bank may pause further cuts in its next policy meeting. This stance has drawn criticism from Bessent and other administration officials who believe that maintaining high rates for too long risks worsening economic imbalances.
Federal Reserve Governor Stephen Miran, who is temporarily on leave from his position as Chairman of the White House Council of Economic Advisers, also expressed concern. In a recent interview, he said that keeping policy too tight could lead the economy into a recession, emphasizing that he saw little reason to take such a risk given that inflation pressures appear contained. Miran had earlier dissented from the Fed's decision to cut rates by only 25 basis points, saying that a 50-basis-point, or 0.5-percentage-point, reduction would have been more appropriate.
Economic observers note that housing tends to react early and strongly to shifts in monetary policy. The prolonged period of high interest rates has dampened new home construction and slowed existing home sales, even as some other sectors continue to show resilience. Analysts suggest that without a clear easing path from the Fed, affordability challenges could persist into the coming quarters, delaying recovery in the housing market.
Source Reuters
5th Jun, 2025
25th May, 2023
11th May, 2023
27th Apr, 2023
Advertisement
Facebook
Whatsapp
