Bessent, Fed's Goolsbee divided on role of energy shock in inflation
TLT•Treasury Secretary Scott Bessent said the Fed should not raise rates in response to inflation he attributed to an energy supply shock, while Chicago Fed President Austan Goolsbee said price pressures had spread to services and medical care and were also fueled by AI-related demand. Goolsbee said the Fed had work to do to reestablish its credibility as recent jobs and inflation reports bolstered the case for further rate hikes.
1. Different views on inflation
Bessent argued the Fed should look beyond noisy inflation readings tied to an energy supply shock connected to the Iran war, saying the underlying US economy was strong. He cautioned against raising rates too much as the shock eases.
2. Services and demand pressures
Goolsbee said inflation had spread beyond energy into services and medical care, and pointed to strong demand linked to the AI data center buildout. He said tariff and oil-price pressures had persisted longer than expected, and that inflation in categories not driven by oil or tariffs remained troubling.
3. Rate outlook
Goolsbee did not commit to a rate hike but said the Fed had work to do to reestablish its credibility. Recent stronger-than-expected jobs and inflation reports bolstered the case for further rate increases, with some officials discussing a possible half-percentage-point hike at the Fed's December 8-9 meeting.
