Beisen Te "clarifies": not calling for interest rate cuts, just discussing the neutral interest rate model

As inflation heats up and expectations for interest rate cuts are frustrated, U.S. Treasury Secretary Janet Yellen urgently clarified that she is not pressuring the Federal Reserve to cut rates, but market concerns remain. On Thursday local time, Yellen stated in a media interview, "I did not tell the Federal Reserve what to do," attempting to downplay her comments on Wednesday about the Fed “possibly entering a series of rate-cutting cycles”. She emphasized that she was only discussing the neutral interest rate model, not pressuring monetary policy. Yellen Urgently Clarifies: Not Pressuring the Federal Reserve to Cut Rates Yellen repeatedly emphasized during the interview on Thursday that she has not been dictating Fed policy. "I believe that if you believe in the neutral interest rate, there is indeed room for a series of rate cuts, but I am not calling for that; I have never called for it. I am just saying that the neutral interest rate model suggests it should be about 150 basis points lower than it is now." This clarification aims to alleviate market concerns about potential interference by the Trump administration in the Fed's independence. Federal Reserve Chairman Jerome Powell previously stated that there are "a range of different views" on the current neutral interest rate level, and he personally estimates that the current rate setting is "slightly restrictive." The neutral interest rate refers to a policy level that neither stimulates nor restricts the economy. The market's reaction to Yellen's clarification has been cautious. Interest rate futures indicate that investors expect the Fed to cut rates by less than 150 basis points by the end of next year, and confidence in a 25 basis point cut at the September meeting has also declined. The retreat of market confidence is also attributed to the U.S. PPI inflation data released on the same day. The data showed that the U.S. PPI rose by the largest month-on-month increase in three years in July, adding uncertainty to the Fed's rate-cutting path. Last month, the Fed maintained the benchmark interest rate in the range of 4.25%-4.5%, and Powell and most officials have argued for months that more time is needed to assess the impact of the Trump administration's tariff increases on inflation and inflation expectations