John Authers on Scott Bessent's 'Ridiculous' Rate Cut Idea

Bessent's Rate Cut Proposal

• 💡 Scott Bessent's claim that "any model" suggests the Fed funds rate should be 150 basis points lower is described as "ridiculous" and not okay.
• ⚠️ Suggesting such a drastic rate cut when core inflation is above 3% and rising is considered dangerous.
• 🧠 While acknowledging the possibility of good faith, the speaker finds it hard to excuse such a statement from a successful hedge fund manager.

Economic Models and Fed Policy

• 📊 The Taylor Rule and other economic models are cited as examples that do not support Bessent's assertion about rate reductions.
• 📉 The speaker notes that many models suggest the Fed funds rate should be higher, not lower.
• 🎯 The core issue is the misrepresentation of economic models to suggest a drastically lower rate is universally supported.

Fed Independence and Dissent

• 🏛️ The speaker touches upon the historical context of presidents wanting more control over interest rates, impacting Fed independence.
• 🗣️ The concept of visible dissent within central banks, like that seen at the Bank of England, is discussed as potentially leading to smoother rate expectations.
• 📈 Despite internal divisions, the Bank of England has experienced a smoother run for rate expectations compared to the US, suggesting honest, open arguments can be beneficial.
• 🇺🇸 The current situation in the US is contrasted with the Bank of England's approach, highlighting concerns about the administration's potential influence on monetary policy.