Treasury Secretary Scott Bessent said Wednesday that the Fed’s additional interest rate hikes aren’t necessarily a mistake.
When asked by CNBC’s Brian Sullivan if future rate hikes would be a monetary policy mistake, Bessent said, “Not necessarily.”
Bessent’s comments came hours after the Fed announced it would keep interest rates unchanged at its October meeting, as most markets expected.
Bessent is a key confidant of President Donald Trump, who has repeatedly called for lower interest rates. Trump pressed Federal Reserve Chairman Kevin Warsh’s predecessor, Jerome Powell, on the issue during Powell’s final months at the helm of the central bank.
But Mr. Bessent said Wednesday that he and Mr. Trump believed Mr. Warsh was doing well and could strike a balance between ensuring full employment and price stability.
“I think Chairman Warsh is off to a great start,” Bessent said. “As I often say, I have a lot of confidence in him.”
The Fed’s decision to keep interest rates unchanged comes a month after raising borrowing costs for the first time in three years. Federal funds futures traders had widely expected the central bank to return to raising rates at its next board meeting in December.
Mr. Bessent said he hoped the Fed would be “open-minded” about the “temporary nature” of supply shocks from energy prices. The US war with Iran has led to a sharp decline in global oil production, which has pushed annual inflation further away from the Fed’s 2% target.
Bessent also said that US efforts to isolate Iran’s economy, called “Operation Economic Expulsion,” have been “very successful.” He said that according to internal estimates, Iran’s economy could contract by up to 25% from March 2025 to March 2026.
Asked about bond yields on artificial intelligence-related debt, the Wall Street veteran said he was “watching” it, but there was no need to cause concern.
Bessent specifically mentioned neoclouds, a type of company that provides specific cloud infrastructure to support AI, which has struggled in the market recently. tesla CEO Elon Musk warned on Sunday that more than 200 neo-cloud companies “will undergo guppy-level extinction and consolidation.”
“I don’t think there’s a problem at all,” Bessent said. “Neocloud is a small component of the overall ecosystem, and we’re still seeing funding close. We’re still seeing deals close.”
Bessent told CNBC that third-quarter GDP data expected Thursday will be “solid.” However, he clarified, “I haven’t seen it yet.”
