Treasury Secretary’s Missed Economic Calls Test Bond Market Confidence
Treasury Secretary Scott Bessent has built a pattern of public economic forecasts that have largely failed to materialize. His February 2025 prediction of a housing market “unfreeze” proved wrong as existing home sales in August hit their slowest pace in over a year and residential construction fell to pandemic lows. His April forecast of $3 gasoline by late summer missed as war in Iran pushed prices above $4.50 per gallon. Inflation remains well above the Federal Reserve’s 2% target despite his projections of a quick return to that level.
Bessent’s July intervention in currency markets to support the yen lasted barely a week before effects dissipated. His attempts to cap yields on long-dated Treasuries through jawboning and expanded buybacks also fell short, with 30-year yields climbing to 5.63% by late September, their highest level since 2002. Traders remain focused on fundamentals rather than the Treasury chief’s commentary, watching both the Iran conflict and U.S. public debt, which breached $40 trillion in August. At a September congressional hearing, Bessent defended the bond market intervention as successful, but economists widely dismissed his claim that the country could grow its way out of debt problems.
Douglas Holtz-Eakin of the American Action Forum said the errant forecasts have damaged Bessent’s credibility, noting that predecessors avoided such explicit predictions to prevent boxing themselves in. Wall Street initially viewed Bessent favorably after he persuaded Trump to roll back Liberation Day tariffs in April 2025, restoring $trillions in market value within a week. But Matthew Aks, formerly of Treasury under Biden and now at Evercore ISI, said recent interventions and ambiguity around goals have created challenges for that impression.
Bessent retains Trump’s trust and manages the U.S.-China economic relationship, and some calls have proven accurate, including his prediction that AI-driven data center construction would boost growth. But his path forward grows more difficult with Democrats expected to gain ground in November midterms. Next year’s debt ceiling negotiations will test whether he can broker compromise with a potentially Democratic Congress while reassuring global bondholders that the U.S. is committed to fiscal discipline, all while the deficit runs near 6% of GDP and Trump promises $5,000 checks to every adult American.
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