Scott Bessent says the Fed needs to cut rates.

He’d know. He and a “Tariff Man” are hard at working engineering a recession and just generally creating the sort of abject uncertainty that prompts executives to say things like, “We are potentially overpaying duties because [tariff] calculations are complex and not completely understood.” (That’s one of several amusing anecdotes from Thursday’s ISM manufacturing release.)

Obviously, Bessent didn’t cite the burgeoning US downturn when arguing for Fed cuts on Fox Business (read: state television). Instead, he pointed to FF/2s, shown below.

“We are seeing that two-year rates are now below fed funds, so that’s a market signal that they think the Fed should be cutting,” Bessent said.

He’s not “wrong,” per se, but as the figure shows, the inversion Bessent’s talking about is nowhere near the pre-September FOMC extremes. Not that you want to get there, necessarily, before you cut again, but Bessent’s being deliberately obtuse: He knows damn well why the Fed can’t cut. Tariffs are inflationary. Right up until they’re not, which is to say right up until pushing the protectionist envelope results in a sharp economic downturn accompanied by disinflationary demand destruction.

That’s a terrible spot for Bessent and Trump to put the Fed in: Cut now on the assumption our inflationary tariffs will prompt a sharp slowdown, which’ll ultimately negate the price hikes and any inflationary impetus from more rate cuts.

It doesn’t help that Trump won’t shut up about Jerome Powell in public. As I’ve emphasized dozens of times since Trump first began assailing Powell on social media in 2018 (which is to say just a few months after appointing him), the louder he screams about Powell’s alleged anti-Trump political motives, the harder it is for Powell to adopt a pro-Trump policy stance.

To be clear, Powell surely hates Trump by now. But that wasn’t always the case. If Trump created a good rapport with the Fed instead of berating them incessantly, he (Trump) could exercise more in the way of control over monetary policy. You’re never going to get a rate cut from Powell by calling him a “loser” on social media. The optics would be terrible, and there’s a sense in which Powell’s actually protecting Trump by not bowing to that kind of public pressure. Because to do so would be to telegraph a loss of independence to the market, which would respond by selling off.

If you’re Trump and you want a rate cut from Powell, the best thing to do is shut up in public, at least long enough for people not to draw a straight line from your badgering to any subsequent rate move. I mean, it’s incredible that I have to explain that. For a man who insists his instincts are infallible, Trump’s almost totally bereft in the intuition department.

Meanwhile, Kevin Hassett on Thursday told CNBC the decline in 10-year yields since January 20 is a reflection of the market’s faith in Trump’s fiscal discipline. “Why does the Treasury rate go down?” Hassett wondered. “It’s because people understand that we’re [not] going to have another inflationary spending blowout like we did in the previous administration.”

It’d be difficult to conjure a more ridiculous assertion if you tried. In this case, the reason “the Treasury rate goes down” (and I’m ignoring that Bessent and Trump stumbled into the second-largest one-week increase in 10-year Treasury yields since the early 1980s last month), is the same reason the two-year rate “goes down”: The market thinks Trump’s going to cause a recession.