US Treasury Secretary Scott Bessent has made his most explicit call yet for the Federal Reserve to start a cycle of interest-rate cuts, suggesting the benchmark rate should be at least 1.5 percentage points lower. However, beyond political positioning, the real question is whether the numbers support such a move.
The Key Obstacle: Debt Placement Challenges
The greatest obstacle to rate cuts lies in the difficulty of placing new US public debt, as market sentiment shows serious doubts about its sustainability—effectively an unofficial downgrade driven by investor behavior.
US Treasury Data Analysis
Using Monthly Treasury Statement data from the Fiscal Service and FRB, this analysis is presented on a calendar year basis (January–July) to avoid political bias. The Fiscal Year (October–July) includes four months of the Biden administration, allowing assessment of the “Trump effect” separately.
1. Deficit Overview (in billions USD)
- Total Deficit: 2024: 1,007 | 2025: 917 → Improvement of 90 (−9% in 7 months)
- Receipts: 2024: 2,977 | 2025: 3,264 → +287
- Outlays: 2024: 3,984 | 2025: 4,181 → +197
2. Revenue Drivers
2025 YTD receipts are up +287 billion USD compared to 2024. Two key sectors account for 84% of this increase:
- Individual Income Taxes: +172 billion (+11.4%)
- Customs Duties: +71.1 billion (+162.3%)
3. Customs Duties in Detail
- YTD 2025: 114.865 billion USD (+71.1 billion vs 2024)
- Q1 2025: 22.756 billion
- Q2 + July 2025: +92.109 billion
Conclusions and Implications
Positive Factors
- The tariff increases have led to a notable 9% deficit reduction in seven months.
- Higher tax receipts, especially from individual income taxes, reflect a stronger revenue base. Trump’s upcoming tax reform, centered on deductions, may reduce the individual tax burden by late 2025.
- The increase in hourly rates (per CPI) is concentrated in medical supplies, particularly pharmaceuticals. If crude oil prices remain below $70–$72, inflationary pressures should stay contained in the medium term.
Interest Rate Outlook
The Treasury budget figures are largely positive and provide a strong foundation for a rate cut of at least 25–50 basis points. This would likely drive yields lower across the entire 5–30 year curve, with positive spillovers to mortgage rates.
Market Reaction
Despite the supportive data, banking lobbies influencing the financial media have allowed this information to pass with minimal coverage. This disconnect between fundamentals and market narratives reinforces the importance of independent analysis.