11AM Hour: Exclusive Interviews with Treasury Secretary Scott Bessent & St. Louis Fed President Alberto Musalem 8/20/26

Treasury Secretary Scott Besson discussed the recent decision by the Treasury to increase bond buybacks, aimed at addressing liquidity issues and signaling that yields do not fully reflect economic fundamentals. He indicated readiness to implement further measures if market conditions require it and emphasized ongoing efforts in fiscal consolidation, including potential revenue-increasing and spending reduction strategies. Besson also highlighted that the perceived peak of the deficit might be near, contingent on policy adjustments and economic conditions.

The discussion covered the current state of inflation, with Besson mentioning supply shocks from Iran and energy markets as temporary factors, while structural demand and AI-driven investments could support a stronger economy. Alberto Musalem of the St. Louis Fed explained that despite rising bond yields, real estate and other assets have appreciated, driven by growth and supply constraints. Both officials reaffirmed their focus on lowering inflation to 2% within 18 months, with Musalem stressing the importance of independent monetary policy centered around labor market and inflation data.

Fed President Musalem provided insight into the Federal Reserve’s approach, emphasizing that current policy rates are below the estimated neutral rate, supporting ongoing rate hikes to combat inflation. He highlighted that inflation, driven by supply shocks and persistent demand due to AI investments, needs to be managed primarily through interest rate adjustments. Musalem also pointed out that rising rates do not necessarily harm real estate values when the economy is growing, and advocated for transparent communication of the Fed's framework, targeted at achieving inflation goals.

Lauren Hochfelder of Morgan Stanley detailed her positive outlook on the real estate sector, citing a rare entry point after years of decline and significant declines in prices. She emphasized structural trends such as supply chain resilience, aging demographics, and AI infrastructure needs—especially in industrial real estate—as key drivers. Hochfelder noted that despite rising yields and potential supply increases, high demand and constrained supply could still support property appreciation, particularly in logistics and senior housing. She also acknowledged geopolitical factors and local politics as influences on real estate performance.