Bessent Urges Fed Not to Over-Hike Into 'Energy Supply Shock'

Treasury Secretary Scott Bessent said Friday that the Federal Reserve should keep an open mind and avoid raising interest rates too much in response to what he called an “energy supply shock” tied to the Iran war, according to Reuters.

“I think the Fed should understand that this is an energy supply shock,” Bessent said in an interview on CNBC’s “Squawk Box,” adding that the underlying U.S. economy is very strong, Reuters reported. “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, according to Reuters. “You know, the Fed’s supposed to look into the future, not look in the rearview mirror.”

Watch CNBC's full interview with Treasury Secretary Scott Bessent. ⬇️ https://t.co/OwrJ4hS1CS

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‘I’m not going to tell the Fed what to do’

Bessent was careful to say the decision belongs to the central bank. “I’m not going to tell the Fed what to do. I am going to say they should have an open mind,” he said, according to Reuters.

He noted that the Fed cut rates three times over the same period last year, Reuters reported. “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,” Bessent said, according to Reuters.

Bessent also said core inflation remains contained and that lower gasoline prices mean next week’s inflation figure is likely to be benign, according to Newsquawk’s summary of the interview. He said the economy is in very good shape, pointing to strong bond auctions and a well-bid dollar, Newsquawk reported.

Wholesale prices hit highest annual rate since 2022

Bessent’s comments came on the same morning the government released new wholesale price data. The producer price index rose 0.3% in October, slightly below the 0.4% economists expected, but the annual rate reached 6.5%, the highest since November 2022, according to CNBC, citing the Bureau of Labor Statistics. Core producer prices, which exclude food and energy, rose 0.3%, matching expectations, Stock Market Watch reported.

A Fed official sees it differently

Not everyone at the Fed shares Bessent’s view. Chicago Fed President Austan Goolsbee said in a CNBC interview Friday that the central bank “definitely has work to do” to maintain its credibility, according to Stock Market Watch. Goolsbee said inflation has spread into categories not driven solely by energy and pointed to the data center buildout and overheating demand as new drivers of higher prices, the outlet reported.

All eyes on December

The Fed held rates steady last month, and Fed Chairman Kevin Warsh said policymakers would watch the data to decide whether more tightening is needed, according to Reuters. A stronger-than-expected jobs report last week bolstered the case for further rate hikes, Reuters reported.

The Fed’s rate-setting committee next meets Dec. 8-9, according to CNBC. Markets are fully pricing in a quarter-point rate increase at that meeting, CNBC reported.

Sources

• CNBC on X: Full interview with Treasury Secretary Scott Bessent
• Reuters (via Yahoo Finance)
• Reuters (via KELO)
• CNBC: October PPI report
• Stock Market Watch
• PiQ Markets
• Newsquawk

Reporting by Daily Beltway.