Bessent Stands Firm on Supply Shock Argument Against Rate Hike

Treasury Secretary Scott Bessent recently discussed his views on the upcoming Federal Reserve meeting in September. Despite Fed Chair Kevin Warsh's Jackson Hole address, which had pushed September hike odds to near 60 percent, Bessent argued that a supply shock could be a reason for holding rates steady.

Bessent stated that traditionally, interest rates are not raised during a supply shock unless second or third-order effects emerge. He noted that core inflation has remained restrained and cited an expected productivity boom from the artificial intelligence buildout as a disinflationary factor.

The timing of Bessent's comments has sparked speculation that they were intended to give Warsh room to delay tightening, but any such intent would still need to clear a committee vote. Several Fed officials have continued to signal support for a hike, leaving the September outcome contested.