Key Points:
- Bessent warns that parts of the U.S. economy are already in recession, especially the housing sector, due to persistently high interest rates.
- He urges the Federal Reserve to implement further rate cuts, cautioning that without swift action, more sectors could slip into a broader economic downturn.
- Despite overall GDP growth nearing 4%, Bessent highlights uneven recovery, emphasizing that some industries are struggling and that aggressive monetary easing is essential to avoid deeper contraction.
Bessent warns that parts of the U.S. economy are already in a recession, cautioning that more sectors could follow if the Federal Reserve does not continue lowering interest rates.
Bessent made the remarks during an interview on CNN, noting that while the economy is still expanding, certain industries are showing signs of contraction. His comments come as business leaders and investors assess how future rate decisions could influence growth, borrowing, and consumer spending.
Economic Growth With Uneven Momentum
Bessent warns that despite U.S. economic growth nearing 4%, Bessent pointed out that the pace of recovery is uneven across sectors. Some industries, he said, have slowed to the point of recession due to rising costs, tighter credit conditions, and weaker consumer demand.
The Federal Reserve recently reduced interest rates but indicated that an additional cut in December is not guaranteed. That decision surprised many investors, who had expected a continued easing cycle. Analysts say the Fed’s cautious tone suggests it is balancing inflation control with concerns about economic cooling.
Before the latest policy announcement, market data indicated investors placed nearly a 100% probability on another rate cut this year. The Fed’s decision to hold back, however, raised questions about whether current rates are high enough to sustain growth in interest-sensitive areas such as housing, small business investment, and manufacturing.
Sectoral Strain and Consumer Pressure
Bessent warns of a “housing recession,” citing challenges in the real estate sector. He said lowering rates could help improve affordability and stimulate construction and home sales.
He also expressed concern for lower-income consumers, who he said face higher debt levels relative to assets. Reduced borrowing costs, he noted, could ease financial strain and support spending activity, a key driver of the broader economy.
“The Fed has caused a lot of distributional problems with their policies,” Bessent said, explaining that uneven rate adjustments have had different effects across income groups and business sectors. Without further cuts, he cautioned, “there are sections of the economy that could go into recession.”
While Bessent did not identify specific industries at risk, analysts have pointed to manufacturing, housing, and retail as areas where growth has weakened over recent months.
Uncertainty Over Economic Data
Complicating matters further, the ongoing government shutdown has disrupted the collection and release of official economic data. Key indicators such as job reports, inflation figures, and retail sales data have been delayed, leaving policymakers and business leaders with limited visibility into real-time economic conditions.
Economists warn that this data gap could make it harder to gauge whether policy adjustments are needed. If the shutdown continues, it may take weeks or even months before comprehensive updates on national output, employment, and inflation are available.
Businesses Watch Fed’s Next Move
For entrepreneurs and business owners, the uncertainty surrounding interest rates adds complexity to planning for the coming quarters. Lower borrowing costs could make expansion and investment more attractive, but a slower policy response might keep financing expenses elevated.
Many industry observers expect that future decisions will depend on how inflation trends and consumer spending evolve over the next few months. If data eventually shows widespread slowing, additional rate cuts could be considered to help stabilize growth.
Bessent warns that until further rate cuts are made, businesses across key sectors — from construction to retail — will be monitoring the Federal Reserve’s next steps closely, weighing how monetary policy will shape both short-term performance and long-term investment strategies.
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