US Treasury Secretary urges Fed to cut rates as oil prices rise amid US-Iran tensions

U.S. Treasury Secretary Scott Bessent reiterated on April 14 his call for the Federal Reserve to lower interest rates, citing easing core inflation even as the U.S.-Iran military conflict continues to affect energy prices. In an interview with Reuters, Bessent said he expects core inflation in the United States to keep easing and argued that the Fed should cut rates, while acknowledging policymakers may want to monitor developments related to the war before acting.

Fed rate-cut outlook and leadership considerations

Bessent said it would be reasonable for Kevin Warsh—appointed by President Donald Trump to replace Jerome Powell as Fed chair when Powell’s term ends in May—to lead the next rate-setting cycle. When asked whether the Trump administration would accept Powell remaining as chair after his term ends on May 15 if Warsh’s nomination has not yet received Senate approval, Bessent said: “We want Kevin Warsh to do this job as soon as possible.”

In an earlier interview with Semafor on April 13, Bessent said the Fed should “wait and see” before deciding whether to cut rates in light of the U.S.-Iran war. He described the U.S. economy as “very strong” in January and February and said the Fed was “doing the right thing by waiting to see” how the conflict unfolds.

Asked whether that indicated a shift away from the administration’s longstanding preference for rate cuts, Bessent told Reuters: “Not at all.” He said the Fed could monitor before cutting, but that “they still need to cut rates.”

Inflation and energy-price pressure

Bessent downplayed the impact of the Middle East conflict on core inflation, arguing that core inflation remains well controlled and is easing across many categories of goods and services. He said he expects prices to fall quickly once the conflict ends.

Recent inflation data show consumer prices rose 0.9% month over month in March, the strongest increase in almost four years, driven mainly by higher gasoline and diesel prices. The core CPI—excluding food and energy—rose 0.2%, matching February’s increase.

After the war began, oil prices surged by as much as 50%. The national average price of gasoline in the U.S. rose above $4 per gallon for the first time in more than three years.

The energy-driven spikes have left markets with little expectation that the Fed will cut rates in 2026.

Warsh confirmation process and Powell’s potential transition

The process of appointing Warsh as Fed chair has faced obstacles from influential Senator Thom Tillis. Tillis is not expected to seek re-election in the midterms later this year and has said he would block any Trump nominee for Fed positions until the Department of Justice resolves a criminal case against Powell related to the Fed headquarters renovation project.

Powell has said he would remain as chair through the end of his term if Warsh has not been approved by the Senate. If Powell steps down as chair, he would still hold a Fed governor seat with a term through the end of 2028 if he wishes.

Bessent said the U.S. Treasury has reached an agreement with Tillis to push Warsh’s confirmation through next week, though he did not provide further details.