USD under pressure as Bessent hints at rate hikes amid Trump inflation concerns

The US dollar faces downward pressure as Treasury Secretary nominee Bessent indicated Trump would support rate hikes if inflation persists, contradicting market expectations of policy easing. Bessent noted Trump believes the Fed is "behind the curve" on inflation, suggesting a more hawkish stance than anticipated. He expressed confidence that inflation will start declining, citing the inverted front end of the yield curve while noting the long end remains well-anchored. Regarding tariffs, Bessent confirmed the administration expects Supreme Court backing and plans to use tariffs to help pay down debt. The comments signal potential policy divergence between the administration and Fed, with Bessent waiting to see if the Fed remains neutral or accommodative. These hawkish signals contrast with market positioning for rate cuts, potentially supporting dollar strength if inflation concerns materialize into actual policy tightening.