Edward Marchesi In a recent interview with CNBC, Treasury Secretary Scott Bessent expressed concern about the impact of what he calls an energy supply shock resulting from the US-Iran conflict. Despite the strength of the US economy, Bessent believes the Federal Reserve should take these energy price increases into account when setting monetary policy.
Scott Bessent's Energy Shock Warning
Motivations and declarations
Bessent emphasized that "the Fed should understand that this is an energy supply shock," adding that "looking back at noisy numbers is not helpful." He urged the central bank to take a forward-looking view rather than relying on past data.
Despite pressure from the White House for easing, the secretary said he did not want to dictate decisions to the Fed, but asked for an open mindset.
Economic indicators that push towards an increase
Consumer price inflation and CPI data
The October Consumer Price Index rose 0,4 percent from the previous month, beating expectations of 0,3 percent.
The core CPI, which excludes food and energy, rose 0,3% . Housing data, particularly the rent index, contributed more than 30% of the overall increase. The Bureau of Labor Statistics was unable to provide a year-on-year comparison for October due to a cutoff in 2025, leaving a gap in assessing energy price dynamics.
Labor market and fuel prices
The employment report showed 165,000 jobs were created in October, confirming the strength of the labor market. Meanwhile, the average price of gasoline fell to $3,87 per gallon , from $4,34 the previous month, but still remains above the $2,98 recorded on February 28, when the United States and Israel began hostilities against Iran.
Market forecasts and Fed policymakers' positions
CME FedWatch and probability of increase
The CME FedWatch monitor indicates an 89,4% probability that the Fed will raise interest rates by a quarter point at its December 9 meeting, with a possibility of a range of 4,00-4,25%. A subsequent update pushed the estimate to 91% , with a marginal 10% probability for a 50 basis point increase.
Opinions by Christopher Waller and Lorie Logan
Governor Christopher Waller said at a conference in London that a 25 basis point hike is desirable unless the core CPI falls below 0,3% . With the actual reading at 0,4% , he left the door open for a possible 50 basis point increase. Dallas Fed President Lorie Logan added that at least two more quarter-point increases are needed to contain inflation.
Geopolitical tensions and energy continue to pressure inflation, but market signals and statements from Fed members indicate that a rate hike in December is more likely than not.