Interest rate cuts imminent? U.S. Treasury Secretary says the market has sent signals to the Federal Reserve

According to the Zhitong Finance APP, on Thursday, U.S. Treasury Secretary Becerra stated in an interview with Fox Business that the U.S. Treasury market is sending clear signals indicating that the Federal Reserve should consider cutting interest rates. "We see that the two-year Treasury yield has fallen below the federal funds rate. The market is conveying a message that they believe the Federal Reserve should lower rates."

As of 9:11 AM New York time, the two-year U.S. Treasury yield was 3.57%, while the benchmark federal funds rate was 4.33%. The current target range for the Federal Reserve's policy interest rate is 4.25% to 4.5%.

Despite the market showing expectations for a rate cut, Federal Reserve officials remain cautious, stating that they are not in a hurry to lower rates as long as inflation has not fallen back to the 2% target level. Additionally, President Trump's recent increase in tariffs may further raise price levels, which has become one of the concerns for the Federal Reserve in delaying a rate cut. The next interest rate decision will be announced on May 7, and nearly all economists predict that the Federal Reserve will keep rates unchanged.

President Trump has continued to criticize Federal Reserve Chairman Powell, accusing him of not cutting rates this year, and on Tuesday he bluntly stated, "This Federal Reserve official under my administration is not doing well."

Although the president's criticism has mainly focused on the overnight federal funds rate, Becerra indicated that he and Trump are actually more concerned about the 10-year Treasury yield, referring to it as "a key point on the curve that we are watching."

Becerra pointed out that since Trump took office, the 10-year Treasury yield has declined. Data shows that as of Thursday, the 10-year yield was about 4.15%, compared to 4.63% on January 20. National Economic Council Director Hassett stated in an interview that this downward trend has saved the federal government a significant amount in interest expenses. "Why has the Treasury yield fallen? Because the market has realized that we will not engage in inflationary spending like the previous administration."

Becerra also reiterated his belief that over time, the uncertainty surrounding tariff policies will gradually diminish and will ultimately be resolved through trade agreements. He mentioned that although there were frequent negative reports about a significant drop in the stock market in April, the overall stock market performance ultimately ended the month flat.

"April saw a thrilling 'whipsaw' in the market," Becerra stated. "Although there has been constant turmoil in the short term, it is worth it in the long run. Right now, I suggest everyone take a deep breath and calm down."

When discussing the pace of progress on trade agreements, Becerra did not rule out the possibility of reaching a preliminary agreement with China first. He pointed out that the current high tariffs between the U.S. and China almost constitute a "de facto embargo," thus negotiations with China need to be conducted in phases