Bessent Urges Fed to Keep an Open Mind on Rates, Says AI Boosts Economy Without Fueling Inflation

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US Treasury Secretary Scott Bessent called on Federal Reserve policymakers to keep an open mind on interest rates, saying he believes productivity gains from artificial intelligence and deregulation will help keep US inflation at an appropriate level. In an interview on Fox News's Sunday Morning Futures on Sunday, September 27, Bessent said the economy is growing strongly under President Donald Trump, partly as a result of tax cuts and deregulation, even though higher oil prices stemming from the conflict with Iran are hitting Americans ahead of the November midterm elections. He also said Fed Chairman Kevin Warsh recognizes that the US economy is growing in a similar or possibly stronger fashion than during Alan Greenspan's tenure as Fed chairman in the 1990s. The US Labor Department reported on September 11 that core CPI, which excludes food and energy, rose 0.3% in August from a month earlier, above analysts' forecast of 0.2%, and was up 2.4% year on year, in line with analysts' expectations. Just days after the CPI data was released, the Fed raised short-term interest rates by 0.25% to a range of 3.75% to 4.00% at its September 16 meeting, the first rate hike since 2023. Bessent argued, however, that core inflation is not running hot and has eased over the past few months.

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％Effective Federal Funds Rate
EFFR
± MixedMonetaryrelevance

Bessent urges the Fed to keep an open mind on rates, but the Fed just hiked 25bp to 3.75-4.00% and he argues core inflation is not hot, giving mixed signals for the policy rate path.

％United States Government Bond 10Y
US-10Y
± MixedMonetaryrelevance

Article discusses Fed rate hike and inflation debate without a clear directional signal for 10Y yields; higher oil prices from Iran conflict and easing core inflation cut both ways.

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