US Treasury chief says Fed should keep 'open mind' as economy runs hot

US Treasury Secretary Scott Bessent urged the Federal Reserve to keep an "open mind" as the central bank raises interest rates for the first time in three years.

Appearing on Fox News on Sunday, Bessent said Fed board members and FOMC officials "should have an open mind," adding that the administration has "created supply through deregulation."

Bloomberg interpreted Bessent's remarks as an indirect call on the Fed to hold off on further rate hikes, with the Treasury secretary arguing that advances in AI and productivity gains from deregulation could allow strong growth and price stability to coexist.

Bessent invoked former Fed Chair Alan Greenspan's handling of the 1990s internet boom, saying Greenspan "let the economy run because he saw improvements based on office equipment, the internet and productivity." He added, "We are probably achieving the same or greater results right now," and said incoming Fed Chair Kevin Warsh "understands this well."

Bessent said that when he and Donald Trump were selecting the new Fed chair, the quality they sought was also someone with "an open mind."

The Fed raised its benchmark interest rate by 25 basis points on Sept. 16 — its first hike since 2023 — and signaled one additional increase could come before year's end.

Bessent pointed to the Atlanta Fed's GDPNow model, which is tracking growth above 5 percent for the current quarter, and said, "This is not inflationary growth." He added that core inflation "has been very subdued and has actually fallen over the past few months," and that the energy shock "is not passing through to core inflation."

Bessent also addressed China's role in the war involving Iran, saying Beijing has "significantly reduced its support for Iran" and that only 15 million barrels of Iranian crude remain at sea. He went on to say that Iranian oil deliveries to China would be cut off within two weeks.