Bessent calls inflation 'short-term blip' as Hormuz closure drives up energy costs

US Treasury Secretary Scott Bessent reaffirmed his position that inflationary pressure stemming from the war with Iran will prove temporary.

Testifying before the Senate Finance Committee on Wednesday, Bessent said economic indicators excluding inflation "remain very solid" and that current price increases amount to nothing more than "a short-term blip."

"The US economy has all the conditions it needs to sustain strong growth," he said, adding that prices would ultimately stabilize after their temporary rise.

The remarks came as the Donald Trump administration works to contain public anxiety over the economic toll of a prolonged war with Iran.

Since the war began, Iran's blockade of the Strait of Hormuz has sent US gasoline and diesel prices surging more than 40 percent.

According to an analysis by Brown University, American consumers have paid more than $53 billion in additional fuel costs since the war's outbreak — over $400 per household.

Rising energy prices have pushed inflation higher: the Personal Consumption Expenditures price index for April climbed 3.8 percent year-on-year, the fastest pace since May 2023, when it stood at 4.0 percent.

The Federal Reserve, in its June Beige Book released Wednesday, said rising energy costs tied to the Middle East conflict "have emerged as a key driver of price pressures," with effects spreading into shipping, packaging, food and fertilizer sectors.

The Fed also noted that uncertainty and concern over fuel price increases had been reported across multiple districts.

It added that credit card spending rose overall while retail foot traffic declined, and that consumer demand for everyday essentials strengthened.

Bessent doubled down on his argument that current inflation remains lower than it was under the Joe Biden administration.

"Since President Trump took office, grocery prices have risen about 2.5 percent," he said. "That is roughly half the annual increase seen under the Biden administration."