US Treasury Secretary Yellen: Inflation will ease, AI is expected to double productivity.

U.S. Treasury Secretary Scott Bessent stated that the Trump administration is committed to laying a successful foundation for the U.S. economy. He pointed out that inflation is expected to start falling, artificial intelligence can at least double productivity, and efforts to relax financial regulations have released around $3 trillion in lending capacity. Bessent, speaking at the Economic Club of New York, stated in a wide-ranging speech: "Now that we have come out the other end of this (Iran) conflict, natural gas prices will fall, and inflation will return to target levels." Bessent called for more time to be given for negotiations between the U.S. and Iran. He noted that even during the closure of the Strait of Hormuz, Iran continued to sell oil to China, and currently exports at $75 per barrel, better than the discounted price of around $92 per barrel a few weeks ago. "This is a very conditional, performance-based negotiation; we have both carrots and big sticks," Bessent said in reference to negotiations with Iran. At the same time, he expressed confidence in Federal Reserve Chairman Kevin Warsh's ability to optimize both inflation and economic growth paths simultaneously, and emphasized that President Trump had stated during Warsh's oath-taking that he would remain independent and act according to his own will. "The President understands... that there are more governments overthrown by bond markets than by howitzers," Bessent said, "I believe he has complete confidence in the Federal Reserve Chairman and believes he will make the right decisions." This statement essentially acknowledges that if inflation gets out of control and the Federal Reserve fails to contain it in time, bond markets will raise interest rates, completing the Fed's work of raising interest rates and subsequently raising borrowing costs. Bessent also stated that he believes AI can at least double productivity, and compared the current technology-driven cycle to the Internet boom of the 1990s. "The late former Fed Chairman Alan Greenspan correctly pointed out that technological prosperity doubled productivity," Bessent said, "Can we achieve at least as much or even more?" He mentioned that mega-cloud service providers like Meta (META.US) and Alphabet Inc. Class C (GOOGL.US) plan to invest $750 billion in the field of AI. Bessent also stated that solving the expensive housing problem requires lowering interest rates and increasing housing supply. He pointed out that the low mortgage rates left over from the coronavirus pandemic are suppressing the willingness of potential sellers to sell, leading to a low turnover rate for buyers. He mentioned that before the Iran conflict erupted, mortgage rates had briefly dropped to below 6%, and mortgage applications subsequently increased. He called for supply-side solutions, but also noted that at the federal level, the government has almost no regulatory authority over this issue. He also stated that crowding institutional investors out of the housing market would help alleviate the problem. Trump is scheduled to sign the 21st Century Road to Housing Act at the Capitol on Wednesday, which is the first major federal housing legislation in decades in the U.S., including measures to prohibit institutional investors from buying homes and other measures aimed at increasing housing affordability.