US Treasury chief urges Fed to hold off on rate hikes during war-driven energy shock
Treasury Secretary Scott Bessent said the Federal Reserve should look past what he called an energy supply shock tied to the conflict with Iran, even as markets expect a rate increase next month.
By Amir Navarro ·
US Treasury Secretary Scott Bessent has urged the Federal Reserve not to raise interest rates in response to what he described as an energy supply shock linked to the US-led conflict with Iran.
Speaking in an interview on CNBC on Friday, Bessent argued that the central bank should see through the recent surge in energy costs because the underlying US economy remains very strong. He cautioned against raising rates too aggressively while the shock is subsiding, calling the incoming figures very noisy numbers. "The Fed's supposed to look into the future, not look in the rearview mirror," he said.
At its most recent policy meeting, the central bank chose to keep interest rates unchanged at 3.75 to 4 percent. CME FedWatch, which tracks the probability of monetary policy decisions, currently forecasts an 89.4 percent chance that rates will be lifted to 4.00 to 4.25 percent at the next meeting, scheduled for December 9.
The Federal Reserve has resisted pressure from the White House to lower borrowing costs, holding rates steady as inflationary pressures build from the US-Israeli war on Iran. Since the conflict began, the Fed has left rates unchanged five times and raised them once.
Rising energy prices have driven much of that pressure. By September, energy costs had climbed 20.4 percent compared with a year earlier. Although October energy price figures have since been published, the Labour Department was unable to gather data in October 2025 because of last year's government shutdown, so it cannot produce a year-over-year comparison for October 2026.
Bessent's comments followed a stronger-than-expected US jobs report that has reinforced the argument for higher rates. The economy added 165,000 jobs in October, according to the Labour Department's release last Friday. "I'm not going to tell the Fed what to do. I am going to say they should have an open mind," Bessent said, noting that the Fed delivered three rate cuts over the same period last year. Reversing course dramatically on the basis of an energy supply shock, he added, "isn't something that I would do if I were on the Fed. But I'm not on the Fed."
Some senior Fed officials are pushing in the opposite direction. On Tuesday, Fed Governor Christopher Waller said he intended to back a quarter-point increase at the central bank's meeting on December 8 and 9 unless the core consumer price index, a key inflation gauge, came in at 0.3 percent or higher. "In that case, I believe a 50-basis-point hike in the policy rate should be considered at the December meeting," he told a conference in London hosted by King's Business School and the Money Macro and Finance Society.
The CPI report was released afterward and showed prices rising 0.4 percent on a monthly basis.
Consumers are already feeling the strain at the petrol pump, where prices are falling but remain elevated. The average price of a gallon of petrol stands at $3.87 ($1.02 per litre), down from $4.34 ($1.14 per litre) a month ago, yet still well above the $2.98 ($0.79 per litre) recorded on February 28, the day the United States and Israel first struck Iran.
