Paulson: The Fed is cutting interest rates too slowly, rates should fall to 2.5% by the end of 2025

Potential Treasury Secretary candidate Paulson, a billionaire in the United States, predicts that the Federal Reserve will cut interest rates in the coming months and lower them to 2.5% by the end of next year.

On September 6th, Paulson stated in an interview with Bloomberg that the Federal Reserve has waited too long to cut interest rates, and the rise in real interest rates (the difference between bond yields and inflation) indicates that the Federal Reserve is lagging behind in easing monetary policy.

Paulson said, "By the end of next year, my best estimate is that the federal funds rate will be around 3%, or maybe 2.5%."

Paulson's rate expectations differ from those of Howard Marks. On Thursday, September 5th, Oaktree Capital co-chairman Marks stated that the "emergency" to curb inflation has ended, and the Federal Reserve is about to start cutting interest rates, but rates will not fall below 3%.

Paulson is famous for heavily shorting mortgage-backed securities before the 2008 financial crisis. If Trump wins the U.S. presidential election, he will be one of the potential candidates for Treasury Secretary.

On Thursday, Trump proposed the establishment of a sovereign wealth fund during a speech in New York. In response to this, Paulson echoed in the interview, stating that the U.S. should establish a sovereign wealth fund exceeding the $1.7 trillion fund in Norway:

I'm delighted to see the U.S. join this party, no longer in debt, but with savings... Over time, it will be larger than any existing fund.

Paulson believes that national savings are a symbol of strength, and a wealth fund can encourage this strength. He thinks Trump can make up some gaps through tariffs and cutting unnecessary expenses