Key Points Despite recent deterioration across all inflation metrics, U.S. Treasury Secretary Scott Besant anticipates price pressures will ease soon, coinciding with the transition to new Federal Reserve Chair Kevin Warsh. Besant stated he expects one or two more "hot inflation readings, followed by significant disinflation." Although recent inflation data has worsened across the board, U.S. Treasury Secretary Scott Besant predicts price pressures will abate shortly, as the new Federal Reserve Chair takes the helm. In a CNBC interview on Thursday, Besant suggested the recent energy-driven surge in inflation could reverse, as the U.S. will "continue to increase production" of oil, mitigating supply shocks from the Iran conflict. "I firmly believe nothing is more transitory than a supply shock, and we can see through to the underlying trend — core inflation was already declining before the Iran conflict erupted," Besant said. "Therefore, I believe core inflation will continue to fall." However, recent trends tell a different story. Multiple data releases this week showed the Consumer Price Index (CPI) rose 0.6% month-over-month in April; even the core CPI, excluding food and energy, increased 0.4% monthly. Overall inflation reached 3.8% year-over-year, with core inflation at 2.8%. Similarly, wholesale prices (PPI), which reflect upstream price pressures, surged 1.4% month-over-month, rising to 6% year-over-year, the highest level since late 2022. Import and export prices also hit their highest levels in nearly four years, indicating the inflation shock is spreading broadly. Besant reiterated that one or two more "hot inflation readings" are expected, "followed by significant disinflation." The Treasury Secretary also noted the impending start of "the Warsh-era Fed" — new Chair Kevin Warsh was confirmed by the Senate on Wednesday and will officially take office after current Chair Jerome Powell's term ends on Friday. Besant expressed optimism that this round of inflation differs from the previous surge in 2021-22. That earlier episode was triggered by the COVID-19 pandemic, which spurred unprecedented fiscal and monetary stimulus alongside severe supply-demand imbalances; concurrently, Russia's invasion of Ukraine disrupted energy markets, sending oil prices soaring. At that time, Fed officials were criticized for labeling price increases as "transitory" and tightening policy too late, allowing inflation to briefly exceed 9%. "During COVID, I never aligned with the 'transitory inflation' camp," Besant said. "We will get through this; it may take days or weeks, but energy inflation will certainly recede."
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