After Waller, Logan and Williams all leaned hawkish this week, Treasury Secretary Scott Bessent went on CNBC today and pushed back.

After Waller, Logan and Williams all leaned hawkish this week, Treasury Secretary Scott Bessent went on CNBC today and pushed back. His line was "I'm not going to tell the Fed what to do. I am going to say they should have an open mind."

His argument is that the inflation pressure is an energy supply shock tied to the Iran war, and that the underlying US economy is very strong. "To hike too much into an energy supply shock when it's coming down, these are very noisy numbers," he said. "The Fed's supposed to look into the future, not look in the rearview mirror."

He also pointed out that the Fed cut rates three times over the same period last year. He said a dramatic reversal "isn't something that I would do if I were on the Fed. But I'm not on the Fed."

Chicago Fed President Austan Goolsbee answered on CNBC later in the day. He said the pressure goes beyond oil into services and medical care, and he pointed to strong demand tied to data centers. He did not commit to a hike.

My read is that this is a polite way for Bessent to lean on the Fed, and he is still leaning. The October CPI gives both sides something. Headline prices rose 0.4% on the month, down from 0.6% in September, and energy rose 0.7% after 5.2%.

Core rose 0.3% for a third straight month. Under Chairman Kevin Warsh, the Fed held last month and said officials would watch the data. The October jobs report came in stronger than expected, with 165,000 payrolls and 4.1% unemployment, and that has bolstered the case for hikes.

So the December decision may come down to a simple question. Does the Fed treat these numbers as noise, the way Bessent wants, or as the signal its own officials have been describing all week?

Sources:
Reuters via Charlotte Observer: https://www.charlotteobserver.com/news/business/article318061929.html
Reuters via Economic Times: https://economictimes.indiatimes.com/markets/us-stocks/news/us-treasury-chief-says-fed-should-not-hike-rates-over-energy-shock-tied-to-iran-war/printarticle/135806960.cms

Not financial advice. For informational and educational purposes only.