After the Federal Reserve's October rate decision kept interest rates unchanged, U.S. Treasury Secretary Scott Bessent sent a thought-provoking signal, breaking the market's long-held impression that the White House consistently pressures the Fed to cut rates.
White House Tone Shifts: No Direct Labeling of Rate Hikes as Policy Misstep
On Wednesday U.S. Eastern Time (early Thursday Beijing time), Bessent was asked whether further Fed rate hikes in the future would constitute a monetary policy error. He responded that this may not necessarily be the case. The remark came just hours after the Fed announced its rate decision, and the outcome of holding rates steady was in line with broad market expectations beforehand. Bessent is a core aide trusted by U.S. President Donald Trump. Trump has long called for rate cuts and repeatedly pressured the Fed on interest rates during the final stretch of former Fed Chair Jerome Powell's term.
But Bessent said that day that both he and Trump approve of the work being done by Kevin Warsh, believing Warsh has the ability to find a balance between the two goals of full employment and price stability. Bessent said: "I think Chair Warsh has had a very good start, and I have always had full confidence in him."
Energy Supply Shock Pushes Up Inflation, Hope for the Fed to Keep an Open Perspective
This rate pause comes exactly one month after the Fed's first rate hike in three years. Traders in the federal funds futures market widely expect that the Fed will most likely resume rate hikes at its December meeting. Bessent said he hopes the Fed can assess the supply shock from energy prices with an open perspective and judge whether the impact of this round of price increases is temporary in nature. The U.S.-Iran conflict has caused a sharp decline in global crude oil production, pushing inflation data further away from the Fed's 2% target. Bessent also mentioned that the Iran economic blockade initiative called "Operation Economic Outcast" has made notable progress. According to internal U.S. estimates, Iran's economy could contract by as much as 25% within a year.
No Need to Panic Over AI Cloud Sector Shakeout, Risks Broadly Controllable
The interview topic then extended to Treasury yield trends related to AI-linked debt. The Wall Street veteran said the U.S. side will continue tracking relevant indicators, but at this stage there is no need for excessive worry. He specifically mentioned neocloud companies, which focus on specialized cloud infrastructure supporting artificial intelligence operations and have recently seen a notable pullback in capital markets. Tesla CEO Elon Musk warned on Sunday that more than 200 similar neocloud companies will face large-scale elimination and industry consolidation. Bessent said: "I think there is absolutely no hidden danger in this matter. Neocloud companies are only a very small part of the overall industry ecosystem, and related financing and transaction activity is still proceeding normally."
Third-Quarter GDP Outlook: Economic Data May Be Stronger Than Expected
Turning to upcoming economic data, Bessent revealed that he expects U.S. third-quarter gross domestic product data, due Thursday U.S. Eastern Time (Friday evening Beijing time), to show strong performance. He added that, as of the interview, he had not yet seen the statistical report in advance.
Conclusion
From persistent pressure for rate cuts to acknowledging that rate hikes can be reasonable, the White House's policy tone has clearly adjusted. With inflation pressure from energy disruptions on one side and a partial shakeout in the AI sector on the other, and multiple variables intertwined, the Fed's December rate decision is tugging at the nerves of global markets.
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