Trump Focuses More on Market Interest Rates Than Federal Reserve’s Benchmark Rate, Says U.S. Treasury Secretary

Trump Prioritizes 10-Year Treasury Yield Over Fed’s Policy Rate, Aims for U.S. Manufacturing Revival / Reuters

Scott Bessent, the U.S. Treasury Secretary under the Trump administration, emphasized that President Donald Trump’s primary concern lies not with the Federal Reserve’s benchmark interest rate but with the 10-year U.S. Treasury yield, a key market interest rate indicator. This perspective sheds light on Trump's broader economic focus, particularly his interest in long-term market trends rather than short-term monetary policy adjustments made by the Federal Reserve.

In an interview with Fox Business on February 5 (local time), Bessent clarified Trump's stance on interest rates, stating, "Both he and I are focused on the 10-year U.S. Treasury yield." He further explained that Trump is not actively pressuring the Federal Reserve to cut interest rates, despite his preference for lower rates to stimulate economic growth. Instead, Trump's strategy appears to rely on broader economic measures to influence market conditions naturally, including deregulation and fostering private sector investments.

Bessent elaborated that Trump believes economic deregulation will attract more private investments, which in turn will address issues related to high interest rates and a strong U.S. dollar without the need for direct intervention from the Federal Reserve. This approach underscores Trump’s market-driven philosophy, where economic fundamentals, rather than monetary policy directives, play a central role in shaping financial conditions.

Regarding trade policy, Bessent highlighted that the Trump administration's ultimate goal with tariffs was to rejuvenate U.S. manufacturing industries. He cited pharmaceuticals and shipbuilding as key sectors targeted for revitalization. While Trump's tariff strategies often appeared aggressive, especially with countries like Colombia, Mexico, and Canada, Bessent noted that these measures were also leveraged to address broader geopolitical concerns, such as immigration and drug trafficking issues. This multifaceted approach to tariffs reflects Trump’s broader economic and diplomatic agenda, where trade policies serve both domestic economic interests and international negotiation tactics.

Meanwhile, the U.S. 10-year Treasury yield closed at 4.42% on February 5, marking a significant drop of 9 basis points from the previous trading session. This decline is notable as it represents the first time since mid-December of the previous year that the yield has fallen below the 4.5% threshold. The drop in yields was attributed to the U.S. Treasury’s quarterly refunding announcement (QRA), which showed minimal changes compared to three months prior, and the release of the January ISM Services Purchasing Managers Index (PMI), which came in below market expectations. The weaker-than-expected PMI suggested easing inflationary pressures, contributing to the decline in long-term interest rates.

This shift in market dynamics aligns with Trump’s economic philosophy, as the focus on long-term yields rather than short-term policy rates reflects his administration’s emphasis on sustainable economic growth through market mechanisms. The combination of deregulation, strategic tariff policies, and attention to key market indicators like the 10-year Treasury yield highlights the distinct economic approach that defined Trump’s presidency and continues to influence his policy outlook.