US Treasury Secretary optimistic about economy returning to 3% growth, three core objectives advancing steadily

As the Iran conflict gradually comes to an end, U.S. Treasury Secretary Scott Bessent expressed an optimistic economic outlook on Wednesday (June 24, local time), stating that the U.S. economy is expected to return to an annual growth rate of 3%.

Currently, the U.S. economy faces multiple headwinds including a rebound in inflation, a weaker labor force, and the drag from tariff policies, resulting in a notable slowdown in growth over the past two quarters. However, officials remain positive on the medium- to long-term recovery outlook, and reiterated their “3-3-3” development goals encompassing economic growth, fiscal deficit, and crude oil production. They also discussed the challenge of balancing a high fiscal deficit with Federal Reserve monetary policy.

Treasury Secretary expresses optimism, recovery faces significant resistance

Bessent stated, “This year, we are hopeful to achieve an economic growth rate of around 3%. The fundamentals of the U.S. economy remain solid.”

However, objective data indicates clear short-term growth pressures. Previously, the annualized U.S. GDP growth for Q4 2025 was only 0.5%, with a slight rebound to 1.6% in Q1 2026, and overall growth for 2025 at 2.1%.

Multiple factors continue to suppress economic recovery: resurging inflation is holding back consumption and investment, the labor market has cooled, and various tariffs implemented by President Trump have pushed up business costs. Together, these factors lengthen the economic rebound cycle.

Bessent added that, before U.S. and Israeli actions against Iran in February, the annualized U.S. economic growth rate was once close to 4%, and the escalation of the geopolitical conflict directly disrupted the prior promising recovery momentum.

Upholding the “3-3-3” strategy, timeline needed for fiscal deficit improvement

Bessent emphasized that his “3-3-3” core development targets remain within achievable range: 3% full-year economic growth, fiscal deficit at 3% of GDP, and domestic crude oil production increasing by 3 million barrels per day.

Regarding deficit management, he stated, “Before the end of the current presidential term, the fiscal deficit as a percentage of GDP is expected to fall back to the 3% range. Only after reaching this threshold will the U.S. government be able to continue reducing the debt-to-GDP ratio.”

From 2023 to 2024, the U.S. fiscal deficit rate exceeded 6% for two consecutive years, with a slight decline to 5.8% by the end of 2025. Maintaining a high deficit during peacetime is rare in history and mainly stems from the lingering effects of large-scale fiscal stimulus during the pandemic. In the first eight months of fiscal year 2026, the fiscal gap reached $1.25 trillion, narrowing by 9% year-on-year. Interest payments on debt are now the second largest fiscal expenditure after social security, continuously increasing the burden on the treasury.

Debt pressure prompts calls for rate cuts, White House trusts new Fed Chair

High interest costs have led President Trump to repeatedly and publicly urge the Federal Reserve to lower benchmark rates to ease the federal government's debt burden. However, with inflation rising again this year, the Fed has chosen to pause its rate-cutting pace, maintaining a generally tight monetary policy stance.

In response to concerns over the direction of monetary policy, Bessent said that President Trump fully trusts the new Federal Reserve Chair, Kevin Warsh, believing he can formulate market-appropriate monetary policies based on current inflation, employment, and growth conditions.

Overall, the easing of geopolitical tensions is creating a favorable external environment for the U.S. economic recovery. The Treasury Secretary holds clear expectations for 3% economic growth. On Wednesday, the market had already priced in the relative resilience of the U.S. economy and policy outlook, pushing the U.S. dollar index to a 15-month high of 101.80, demonstrating the dollar’s strength. In the short term, inflation, a high fiscal deficit, and tight monetary policy remain unavoidable constraints, but the official medium- and long-term development targets remain unchanged.

Going forward, the market will closely watch changes in energy and inflation following the resolution of the Iran conflict, as well as subsequent monetary policies issued by Fed Chair Kevin Warsh. Both will jointly determine whether the U.S. economy can achieve its recovery goals as scheduled.