The administration is advising central bank officials to look past volatile energy figures, pointing to a resilient domestic economy that does not warrant sudden monetary tightening. A recent stronger-than-expected jobs report revived arguments for additional rate hikes, even after market momentum previously slowed amid post-election equity declines and worries over AI demand. The central bank held its benchmark rate steady last month as officials monitor economic reports. The Treasury chief noted that the Federal Reserve had issued three rate cuts during the same timeframe last year.
Key points
The Treasury chief opposes dramatic monetary policy reversals driven exclusively by tempo…: The Treasury chief opposes dramatic monetary policy reversals driven exclusively by temporary energy market supply shocks.
Central bank officials are monitoring upcoming economic data to evaluate whether addition…: Central bank officials are monitoring upcoming economic data to evaluate whether additional rate increases will be necessary.
The Federal Reserve implemented three interest rate cuts over the exact same period durin…: The Federal Reserve implemented three interest rate cuts over the exact same period during the previous year.
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"I think the Fed should understand that this is an energy supply shock," while the underlying US economy is very strong, Bessent said in an interview on CNBC.
"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. "You know, the Fed's supposed to look into the future, not look in the rearview mirror."
A stronger-than-expected US jobs report last week bolstered the case for further Federal Reserve interest rate hikes, which had lost some momentum amid a post-election stock market selloff and growing fears that weaker AI-driven demand could undercut the economy.
The US central bank left its policy rate on hold last month, with Fed Chairman Kevin Warsh saying policymakers would be watching for data to help decide whether more monetary policy tightening would be needed.
"I'm not going to tell the Fed what to do. I am going to say they should have an open mind," Bessent said.
The Fed did three rate cuts over the same period last year, he noted.
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