Parts of the U.S. economy, particularly housing, may already be in recession because of high interest rates, U.S. Treasury Secretary Scott Bessent said Sunday. He repeated 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 acknowledged that although the overall U.S. economy remains solid, high mortgage rates continue to hinder the real estate market. Housing, he explained, is effectively in a recession that is hitting low-end consumers the hardest because they tend to have debts rather than assets.
Pending home sales in the United States were flat in September, according to the National Association of Realtors. The treasury secretary characterized the overall economic environment as being in a transition period.
Fed Chair Jerome Powell last week signaled that the central bank may not cut rates further at its December meeting. This stance prompted sharp criticism from Bessent and other officials from the Trump administration.
Federal Reserve 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 risks inducing a recession if it does 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, instead advocating for a 50 basis points cut (0.5 percentage points).
“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 interview, 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 this view, noting that the Trump administration’s cuts in government spending have helped lower the deficit-to-gross-domestic-product ratio to 5.9% from 6.4%, which in turn should help reduce inflation.
The Federal Reserve can also assist by continuing to bring down interest rates, he added.
“If we are contracting spending, then I would think inflation would be dropping. If inflation is dropping, then the Fed should be cutting rates,” Bessent said.
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