Bessent urges Fed to cut rates as core inflation cools — but oil-driven risks loom

If inflation cools and the Fed cuts rates, yield curves will reprice lower and duration-sensitive assets like 2Y and 5Y Treasuries will gain value. US Treasury Secretary Scott Bessent states that core inflation will continue to ease despite the Iran conflict. He calls for the Federal Reserve to lower interest rates. At the same time, Fed minutes from March 17–18 show a growing number of officials believe rate hikes may be necessary if inflation remains above 2%. The Iran conflict has increased oil prices, raising risks of sustained inflation and delayed rate cuts. Many Fed officials warn higher oil prices could feed into core inflation and delay progress toward the 2% target. The Federal Reserve held rates steady in the 3.50%–3.75% range in March but maintains a baseline outlook for future rate cuts. A prolonged war could weaken labor market conditions, reduce household purchasing power, and dampen global growth. If oil prices pass through to core inflation, the Fed may remain restrictive, pushing yields higher and reducing the value of long-duration bonds.