WASHINGTON — Treasury Secretary Scott Bessent said on Friday that the Federal Reserve should keep an open mind and not raise interest rates in response to an “energy supply shock” tied to the war with Iran, Reuters reported.
“I think the Fed should understand that this is an energy supply shock,” he said in an interview on CNBC. The underlying U.S. economy, he added, is very strong.
Bessent called the recent inflation figures noisy, and energy-driven. “So I think that to hike too much into an energy supply shock when it’s coming down, these are very noisy numbers,” he said. “You know, the Fed’s supposed to look into the future, not look in the rearview mirror.”
He stopped short of telling the central bank what to do. “I’m not going to tell the Fed what to do. I am going to say they should have an open mind,” Bessent said.
The Fed, he noted, cut rates three times over the same period last year. “And now to reverse just based on an energy supply shock, a reversal in a dramatic way isn’t something that I would do if I were on the Fed. But I’m not on the Fed.”
A week of hot price data
His comments came at the end of a week that pushed the other way. The Bureau of Labor Statistics reported on Friday that producer prices rose 0.3 percent in October and 6.5 percent over the year, the largest 12-month increase since November 2022.
Consumer prices rose 0.4 percent in October, the bureau reported on Tuesday, and core prices rose 0.3 percent for a third straight month. A stronger-than-expected jobs report last week also bolstered the case for further rate increases, according to Reuters.
Inside the Fed, the argument this week has run toward tightening. Governor Christopher Waller said on Tuesday that he is leaning toward a 25 basis point increase at the December meeting, and that a 50 basis point move should be considered if core inflation stays at 0.3 percent or more. New York Fed President John Williams said on Thursday evening that inflation remains far too high and that policymakers will need to act to bring it back to the 2 percent goal, according to Reuters.
Held last month, deciding in December
The central bank left its policy rate on hold last month. Chair Kevin Warsh said policymakers would watch the incoming data before deciding whether more tightening is needed, according to Reuters.
The next decision comes at the Dec. 8-9 meeting. Bessent’s remarks put the administration’s top economic official on the other side of that debate from the officials who have spoken this week — less than a month before they vote.