Bessent Urges Fed Open Mind on Rates, Cites AI Productivity

Treasury Secretary Scott Bessent urged Federal Reserve policymakers to keep an "open mind" on interest rates, pointing to artificial intelligence and deregulation as forces that will hold US inflation down. The remarks, made on Fox News' Sunday Morning Futures, land days after the Fed under Chairman Kevin Warsh raised its benchmark rate for the first time since 2023. US core consumer prices rose 0.3% in August and 2.4% annually, the government reported on 11 September, with diesel and gasoline costs still elevated by the Iran conflict and Ukrainian strikes on Russian energy infrastructure.

Context — why the Treasury's rate framing matters now

Bessent's argument rests on a precedent the report itself names: Alan Greenspan's tenure through the 1990s internet boom, when the Fed chairman "let things run" rather than pre-emptively tightening against productivity-driven growth. Bessent told Fox News that current economic gains are comparable to, or potentially more substantial than, that period.

The mechanism he is describing is a looser reaction function. If AI and deregulation raise supply-side capacity, the argument goes, faster growth need not generate the inflation that would otherwise force the Fed to tighten. That logic gives the central bank cover to look through hot near-term prints.

Warsh was appointed by President Trump, which is what gives the framing weight beyond commentary. A Treasury Secretary advocating tolerance for growth carries more signal when the sitting Fed chair was selected by the same administration.

The catalyst chain runs in the opposite direction to Bessent's optimism. Fuel costs tied to the Iran war and Ukrainian attacks on Russian energy infrastructure have pushed up bond yields globally and fed directly into US price data, and Bessent acknowledged those costs are weighing on voters.

The timing is political as well as monetary. November's midterm elections sit close enough that diesel and gasoline prices at the pump are a live campaign issue, which is why the administration is arguing productivity can offset energy-driven inflation.

Data — what the inflation and rate numbers show

The hard figures in the debate are narrow. Core consumer prices, which strip out food and energy, rose 0.3% month-on-month in August and 2.4% year-on-year, per data released on 11 September. Days later, the Fed raised its benchmark rate for the first time since 2023.

Bessent's counter-claim is directional rather than numerical: he said core inflation has been "quiescent" and has actually eased over the past several months. The report does not give the prior monthly or annual core prints, so the size of that decline cannot be measured from the figures available.

Item	Reading
Core CPI, August, monthly	+0.3%
Core CPI, August, annual	+2.4%
Data release date	11 September
Fed action	First rate hike since 2023
Iranian oil at sea to China	~15 million barrels

The headline-versus-core split is the whole argument in miniature. Energy is excluded from the core measure Bessent cites as quiescent, yet energy is exactly what the Iran conflict has made expensive, and it is what voters feel.

On the Iran file, Bessent said China has substantially reduced assistance to Tehran, leaving roughly 15 million barrels of Iranian crude on the water bound for China. He expects a final delivery to Chinese buyers within about two weeks.

Analysis — what it means for rates, oil and sector exposure

Read properly, the remarks are advocacy rather than a policy signal. Bessent cannot set rates, and the Fed has just tightened, so the practical content is the administration's preferred reaction function, not an imminent pivot. But the framing matters for rate expectations because of Warsh's appointment.

The second-order effects split by asset. If markets price a Fed more willing to tolerate growth, the pressure valve sits on front-end yields and on rate-sensitive equities, while the dollar's carry appeal depends on whether the hiking cycle is genuinely finished or merely paused.

Energy is the awkward leg. A further tightening of Iran's remaining export outlets would reinforce upside price risk at exactly the moment the broader Hormuz standoff remains unresolved, and diesel and gasoline are already embedded in the inflation data and in global bond yields.

China's reduced purchases of Iranian crude cut the other way for Tehran. Bessent suggested the loss of that outlet adds to the pressure on Iran to reach a deal on reopening the Strait of Hormuz, tying the domestic cost message to the administration's regional strategy.

The counter-argument is straightforward and deserves stating. Productivity gains are hard to measure in real time, and the Greenspan precedent only reads as vindication because inflation stayed contained; a Fed that looks through energy-driven prints and is wrong inherits a harder problem later.

Positioning follows that uncertainty. Desks holding duration are effectively short the productivity story, while energy exposure is a hedge against the Iran tail the report leaves open.

Outlook — what to watch next

Two clocks matter. The first is the inflation data calendar, where the next core CPI print is the cleanest test of whether Bessent's "quiescent" characterisation holds up against the 0.3% monthly and 2.4% annual August readings. The report gives no date for that release.

The second is the two-week window Bessent put on Iran's final oil deliveries to China. If those barrels clear as he expects, Tehran loses its remaining major buyer and the Hormuz pressure intensifies; if deliveries stall, the energy-cost problem feeding core-adjacent inflation persists.

Global bond yields are the transmission channel to watch. Fuel-driven inflation has already pushed them higher, and a Fed that leans toward Bessent's open-minded stance would show up first as a flatter front end rather than a sharp move either way.

Frequently Asked Questions

What does Bessent's call for an open mind on rates actually mean?

It means the Treasury Secretary wants the Fed to weight productivity gains from AI and deregulation more heavily than near-term inflation prints when setting policy. It is a preference about the Fed's reaction function, not a decision. Bessent does not vote on rates, and the Fed under Warsh had just raised its benchmark rate for the first time since 2023.

Why does the Greenspan comparison matter for rate expectations?

Greenspan's Fed through the 1990s internet boom tolerated faster growth on the view that productivity would keep inflation contained. Bessent is arguing today's AI-driven gains are comparable or larger. If markets accept that framing, they price a Fed slower to tighten against strong data, which lowers the expected path of front-end rates.

What happens to oil if Iran's deliveries to China end?

Bessent said roughly 15 million barrels of Iranian crude remain at sea bound for China, with final delivery expected within about two weeks. Losing that buyer would tighten Iran's remaining export outlets and reinforce upside price risk while the Hormuz standoff is unresolved. Diesel and gasoline costs are already lifting bond yields and US price data.

Bottom Line

Bessent is lobbying for a Fed that looks through energy-driven inflation, and the market's read on Warsh is what decides whether that framing sticks.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. CFD trading carries high risk of capital loss.