Key Takeaways
- Treasury Secretary Scott Bessent predicts a non-inflationary economic acceleration for the remainder of 2026, comparing the current trajectory to the extended expansion of the 1990s.
- Brent Crude oil prices plummeted below $75 per barrel, hitting levels not seen since the onset of the U.S.-Iran conflict in February, following news of a preliminary peace memorandum.
- President Donald Trump announced that Iran has agreed to toll-free passage in the Strait of Hormuz, clearing the way for the release of frozen Iranian funds to be used exclusively for U.S. agricultural and medical exports.
- Bessent criticized the Federal Reserve's "dot plot" projections, suggesting they should be abandoned while expressing confidence that the U.S. Dollar will remain dominant even as interest rates begin to fall.
- In a political shift, Bessent identified New York City Mayor Zohran Mamdani as the new leader of the Democratic Party following a "clean sweep" by Mamdani-backed progressives in New York's congressional primaries.
Economic Outlook: A Return to the 1990s
Treasury Secretary Scott Bessent issued a bullish forecast for the U.S. economy on Wednesday, stating there is a "good chance" of a repeat of the 1990s-style extended economic expansion. Speaking at the Economic Club of New York, Bessent argued that the U.S. can achieve high GDP growth without traditional inflation, driven by a "non-inflationary economy acceleration" expected for the rest of the year.
Bessent noted that while structural inflation has persisted in the services sector, he expects real wage growth to return to its pre-April cadence. He also reflected on his earlier projections, admitting that in February he believed inflation would be closer to 2% by mid-summer, a goal the administration continues to pursue through its "America First" deregulation and investment agenda.
Geopolitical De-escalation and Energy Markets
The energy sector saw a sharp correction as Brent Crude (BNO) dropped under $75 a barrel, a significant psychological floor. The decline followed a post from President Donald Trump on Truth Social, confirming that Iran has informed the U.S. there will be no tolls in the Strait of Hormuz.
As part of the de-escalation, the U.S. will begin releasing Iranian money through Doha. Bessent clarified that a large share of these funds is earmarked for the purchase of U.S. items, specifically corn, wheat, and soybeans from American farmers. This move is expected to further ease global supply chain pressures and lower domestic energy costs, which had surged since the conflict began in February.
Monetary Policy and Dollar Dominance
Bessent took aim at the Federal Reserve's communication tools, stating, "I don't think anyone should do Fed dot projections." The comment comes as the market navigates the first term of the new Fed Chair, Kevin Warsh, who has inherited a committee split on the timing of future rate cuts.
Despite the potential for lower rates, Bessent remains steadfast on the strength of the greenback. "You can have a strong dollar when rates are being cut," he asserted, adding that dollar dominance is essential to U.S. economic statecraft. He predicted that both Russia and Venezuela would eventually seek a return to the dollar-based system post-conflict, noting that Iranians are already invoicing in dollars.
Political Landscape: The Rise of Mamdani
On the domestic front, Bessent commented on the results of "last night's" primaries, declaring that Mayor Zohran Mamdani has emerged as the clear leader of the Democratic Party. Mamdani’s slate of progressive candidates successfully ousted several establishment incumbents in New York, a development Bessent suggested marks a fundamental shift in the opposition's leadership and policy direction.
As the U.S. prepares for its 250th anniversary celebrations, the administration appears to be leveraging this moment of geopolitical easing to solidify its "investment, innovation, and income" framework over the previous administration's focus on interest rates and immigration.
Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications.