He argued that sustained supply-side improvements could contain inflation, despite solid GDP growth.
Joe Lavorgna, counselor to Treasury Secretary Scott Bessent, reportedly backed further interest rate cuts in 2026 while expecting the U.S. economy to grow by about 3% next year.
During an interview with Yahoo Finance, Lavorgna stated that the Federal Reserve can cut rates next year even as the U.S. economy continues to show resilience, after a report by the Bureau of Economic Analysis showed that the Gross Domestic Product (GDP) grew at an annualized rate of 4.3%, higher than the Dow Jones forecast of 3.2%.
He added that if the U.S. economy continues to grow at 3% in 2026 with supply-side gains, that will result in lower inflation. In this light, if the Fed keeps interest rates steady, that will result in a restrictive monetary policy.
“So, the Fed can continue to lower rates. The Fed should lower rates based on its own estimates of where our star is, the neutral rate, and based on the fact that interest-sensitive activity is still extraordinarily weak, and that's where monetary policy has the most impact,” Lavorgna said, according to the report.
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