The Treasury Secretary's dual identity: Why Bessant insists on pushing the Federal Reserve to cut interest rates

U.S. Treasury Secretary Yellen once again pressures the Federal Reserve to cut interest rates. She claims that lower rates are the “only missing element” for achieving stronger economic growth and states that 2026 will witness the “return” of Trump’s “America First agenda.” While this may seem like a simple policy proposal, it actually reflects a deep internal power struggle within the Trump administration regarding economic policy.

Yellen’s Dual Roles

Yellen now plays two key roles. As Treasury Secretary, she is the enforcer of Trump’s economic agenda. At the same time, she is leading the selection process for the Federal Reserve Chair candidate, which means she has significant influence over the upcoming vacancy of the Fed Chair position in May.

This overlap of roles is no coincidence. Yellen has repeatedly echoed Trump’s calls for lower interest rates, which serves both to advance policy goals and to pave the way for her influence within the Fed’s power structure. The current frontrunner is White House National Economic Council Director Jared Bernstein, and Yellen’s support or opposition could change the landscape.

Economic Data Provides a “Reasonable Excuse”

Yellen’s call for rate cuts is not baseless; economic data indeed supports it.

According to the latest figures, U.S. CPI stands at only 2.7%, well below the market expectation of 3.1%. This lower-than-expected inflation data provides technical support for rate cuts. Fed Governor Michelle Bowman even predicts about 150 basis points of rate reductions by 2026, indicating rising internal approval within the Fed for easing.

Another key data point is the decline in tariff revenue. Since the Trump administration implemented tariffs last April, tariff income has continued to weaken:

The shortfall in tariff revenue means the government’s fiscal space is constrained. In this context, cutting rates to stimulate economic growth becomes even more necessary. Yellen previously estimated that tariffs could generate between $500 billion and nearly $1 trillion in revenue, but reality has fallen far short of expectations, which explains her current urgency in pushing for rate cuts.

The Core of the Power Struggle

Behind this rate-cutting call is a power struggle over the authority of the Fed Chair. Yellen is positioning herself to support Trump’s new policies while also shaping her influence as an economic decision-maker.

The core demand of the Trump administration is to ensure economic growth, and rate cuts are a tool to achieve this. As Treasury Secretary, Yellen’s public calls send a signal to markets and the Fed: the government needs lower interest rates to support the “America First agenda.” This pressure comes from both political and economic realities.

Future Focus

How the Fed responds to this pressure is crucial. While inflation data supports the case for rate cuts, the Fed’s independence remains a concern. Powell’s term has four months remaining; whether he will compromise at the end of his term or stand firm will determine the monetary policy direction in the first half of 2026.

Summary

Yellen’s call for rate cuts is not only an economic policy initiative but also a reflection of a power struggle. Lower-than-expected inflation and insufficient tariff revenue provide economic backing for her stance, while her role in the Fed Chair selection adds a deeper political dimension. In the first half of 2026, the Fed will face pressure from both political and economic fronts, and the final decision on rate cuts will reflect the outcome of this struggle.