US Treasury Secretary Bessent: Applauds 25 Bps Fed Cut, But Criticises Policy Language

By IFCCI News Desk | October 16, 2025

U.S. Treasury Secretary Sarah Bessent praised the Federal Reserve’s decision to cut interest rates by 25 basis points, calling it “a measured and necessary adjustment” to support economic resilience amid slowing growth. However, she expressed concerns over the Fed’s accompanying language, which she described as “too cautious” and potentially counterproductive for market confidence.

Policy Adjustment Welcomed but Messaging Questioned

Speaking at a post-FOMC briefing in Washington, Bessent said the rate reduction “aligns with the broader fiscal and macroeconomic realities” of moderating inflation and tightening credit conditions. Nonetheless, she noted that the Fed’s communication — emphasising lingering inflation risks and data dependency — could “limit the psychological and liquidity benefits” the move was designed to achieve.

“Markets needed assurance of a clear pivot toward policy normalisation. Instead, the Fed’s tone suggested hesitation,” Bessent remarked, adding that the Treasury “remains focused on reinforcing credit stability and sustaining investment momentum.”

Her remarks come as investors digest the Fed’s first rate cut in over a year, which reduced the federal funds target range to 4.75–5.00%.

Market Reactions: Relief Rally Meets Lingering Uncertainty

Equity markets initially rallied following the announcement, but enthusiasm faded as Powell’s press conference reiterated a cautious stance. The S&P 500 closed flat, while Treasury yields edged lower across the curve. The U.S. dollar index (DXY) briefly fell below 104 before recovering in late trading.

Analysts at Goldman Sachs and TD Securities said the Fed’s tone reflected a “risk-managed easing path,” aiming to avoid reigniting inflation expectations. However, some policymakers, including Bessent, fear that overly conservative guidance may dampen credit expansion and corporate spending at a time when global growth indicators remain fragile.

Fiscal and Monetary Policy Coordination in Focus

Bessent also highlighted the need for improved coordination between fiscal and monetary authorities, stressing that “monetary easing alone cannot ensure broad-based economic recovery.” The Treasury, she said, is prioritising infrastructure financing, small business liquidity, and green investment initiatives to complement the Fed’s policy shift.

Meanwhile, market observers expect further rate cuts in early 2026 if inflation continues to trend lower. Futures pricing suggests a 70% probability of another 25 bps reduction at the March meeting.

Outlook: Balancing Confidence and Caution

The Fed’s latest move reflects a delicate balancing act between restoring market confidence and maintaining inflation vigilance. While Bessent’s critique underscores growing debate within Washington over communication strategy, consensus remains that easing was both justified and overdue.

With global growth uncertainty persisting and the dollar stabilising near recent highs, markets will be watching closely whether the Fed’s next signals lean toward conviction — or continued caution.