International Forex News - August 31

Barclays Expects the Federal Reserve to Raise Rates by 25 Basis Points in Both September and December

August 31, News: Barclays said it expects the Federal Reserve to raise interest rates by 25 basis points in both September and December, as recent comments from Federal Reserve Chair Kevin Warsh suggest a more hawkish policy stance. The bank had previously expected the Federal Reserve to keep rates unchanged for the remainder of the year.

US Treasury Secretary Bessent: Government Cannot Change the Equilibrium Price of Bonds, Will Advance Fiscal Consolidation With Warsh

August 31, News: US Treasury Secretary Scott Bessent said he and Federal Reserve Chair Kevin Warsh share similar views on bonds. He noted that the 10-year US Treasury yield has been broadly unchanged since President Donald Trump took office. Bessent stressed that he has never said he was trying to change the direction of the bond market, and that the government cannot change the equilibrium price of bonds. He also declined to speculate on the Federal Reserve's next move.

Bessent said core inflation remains relatively moderate and that the Federal Reserve traditionally does not raise rates in response to supply shocks. He also disclosed that he has not yet bought any bonds and is working with Budget Director Vought on a fiscal consolidation plan. He said the United States could become the world's leading bond market through its bond buyback program, adding that hedge fund managers prefer to “speed up the process.”

Regarding investor Stanley Druckenmiller's recent criticism of the US Treasury's bond buyback policy, Bessent said he spoke with Druckenmiller after the publication of his opinion piece and added: “I think Druckenmiller lost money on the day he published that editorial.” Bessent also noted that Fitch has reaffirmed the US credit rating.