US Treasury Secretary Scott Bessent said the Fed should not hike rates over an energy supply shock tied to the Iran war. Chicago Fed President Austan Goolsbee countered on the same network that price pressures reach well beyond oil. The split comes as some officials discuss a half-percentage-point increase in December.
US Treasury Secretary Scott Bessent said on Friday that the Federal Reserve should not hike rates because of inflation driven by an energy supply shock tied to the Iran war. Chicago Fed President Austan Goolsbee promptly contradicted him on CNBC.
Bessent: look past the energy shock
Bessent argued that the underlying US economy is very strong and that the numbers are noisy. According to Bessent in a CNBC interview: "the Fed’s supposed to look into the future, not look in the rearview mirror." He added that he would not tell the Fed what to do, but that it should keep an open mind.
Bessent also noted that the Fed had cut rates last year. A dramatic reversal based only on an energy supply shock is not something he would do if he were on the Fed, he said.
Goolsbee: price pressures are broader than oil
Goolsbee said inflation was not just due to energy. In his account, it had spread to the service sector and to areas like medical care that do not usually respond to oil prices, and strong demand tied to the AI data center buildout also kept it elevated.
He did not commit to a rate hike. Still, he said the Fed has more work to do to continue to reestablish its credibility. Asked whether the economy is on a path back to 2%, Goolsbee said his feeling right now is that it is not.
December meeting in focus
Fed policymakers were open to the possibility they could look through supply-driven inflation at the start of the war with Iran, according to Reuters. But as inflation stayed above the Fed's target, concern grew, and so did support for a rate hike.
Recent stronger-than-expected jobs and inflation reports have prompted some officials to discuss a larger-than-typical half-percentage-point increase at the December 8-9 meeting. Goolsbee said coming inflation data is the key to whether the Fed needs a faster pace of increases.
Source: Investing.com (Reuters)
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