Bessent Shifts Stance to Less Dovish, Advocates for Steady Rates Amid Mild Inflation

Treasury Secretary Bessent signals a hawkish pivot, urging the Fed to hold rates steady. He cites stable core inflation and defends Warsh’s opaque communication strategy, marking a distinct shift from earlier dovish modeling.

Woofun AI reports that U.S. Treasury Secretary Bessent has adjusted his policy reaction function toward a less dovish posture. While earlier models suggested rates could sit significantly above neutral, Bessent now argues the Federal Reserve should maintain current interest levels. On August 4, he defended Warsh's refusal to detail a specific reaction function, stating that 'every meeting should be open' and that keeping options open yields the best outcome. Although he acknowledged recent shocks, he characterized underlying inflation as 'very mild' and 'very steady,' particularly in core measures excluding volatile energy items. He concluded that this stability is likely to persist, implying no immediate need for rate adjustments.