Treasury Secretary Scott Bessent said he expects the U.S. housing market to pick up steam after recent indicators came in below forecasts, and he sees potential for inflation to return to the Federal Reserve’s 2% target “quickly.”
“We’re still living through this Bidenflation” for now, Bessent said Friday in an interview with Bloomberg Television’s David Westin, referring to the Trump administration’s contention that former President Joe Biden drove up consumer prices with his economic policies.
“Over the next six to 12 months, as we deregulate, drill more American energy” and bring certainty to extending the 2017 tax cuts, “we could very quickly go back to the Federal Reserve target of 2%,” Bessent said.
The Treasury chief spoke hours after the Fed’s preferred inflation gauge
Concerns that inflation will remain sticky, or even accelerate as President Donald Trump executes tariff hikes on U.S. trading partners, have stoked worries about longer-term borrowing costs also remaining notably higher than prior to the pandemic.
Yields on 10-year Treasury securities, which Bessent on Friday reiterated are a target for him, are around 4.2%, compared with an average of about 2.5% over the past decade. That’s kept borrowing costs on 30-year fixed-rate mortgages — which use Treasuries as a benchmark — well above 6%, creating a headwind for the nation’s housing market.
“The housing market is stuck now, but I would expect that the housing market, sometime in the next few weeks, is going to unfreeze,” Bessent said.
Pending sales of existing U.S. homes slumped to a record low in January as severe winter weather slowed activity and consumers balked at high prices and mortgage rates. Housing starts also slowed in January as builders pulled back on single- and multifamily home construction amid growing worries over borrowing costs and unsold properties.
“We’ve got a lot a lot of anomalies going here, whether it was the tragic fires out in California, the cold weather in the Northeast,” Bessent said, pointing to a rebound in the vital spring selling season.
Bessent said he agreed with the view that, in six to 12 months’ time, Trump assumes responsibility for how the economy is performing. He reiterated that the administration is committed to reducing the fiscal deficit, which is projected to remain above 6% as a ratio of GDP for years to come.
Tariffs could bring “substantial” income over the next decade and are already beginning to do so, he said.
“We’re determined to get this down,” he said of the deficit. Trump asked him about when the federal budget could be balanced, “and we’ll see,” Bessent said. “I’m slightly shocked at some of the fraud we’re finding” in federal spending, he said. “And you’re going to be hearing about more of that over the next couple of weeks.”