Speaking Thursday to CNBC, Bessent said the energy-fed inflation surge recently is likely to reverse as the U.S. is “going to keep pumping” oil, easing the supply shock from the Iran war.
“I firmly believe that nothing is more transient than a supply shock, and we can, we can look through that, because before the Iranian conflict began, core inflation was coming down,” Bessent told CNBC’s Joe Kernen from the sidelines of President Donald Trump’s summit with his Chinese counterpart, Xi Jinping. “So I think core inflation will continue coming down.”
That hasn’t been the recent trend, however.
Separate readings this week showed that consumer prices jumped 0.6% in April — and still rose 0.4% even when focusing on core costs that exclude food and energy. Twelve-month inflation stood at 3.8% for inflation and 2.8% for core.
Similarly, wholesale prices, a better indication of pipeline pressures, soared 1.4%, putting the 12-month level at 6%, the highest since late 2022. The inflation shock showed up in import and export prices as well, which also posted their highest levels in about four years.
Bessent said he thinks there will be one or two more “hot inflation numbers, but then I think we’re going to see substantial disinflation.”
The Treasury chief also noted that the “Warsh Fed” is about a begin, a reference to incoming Chair Kevin Warsh, who was confirmed Wednesday by the Senate and will start after current Chair Jerome Powell’s term ends Friday.
Bessent said he remains optimistic that this period is different than the last inflation surge in 2021-22. The prior move followed the Covid pandemic, which sparked unprecedented fiscal and monetary stimulus as well as a massive supply and demand imbalance. At the same time, the Russian invasion of Ukraine hit energy markets, causing oil prices to spike.
Fed officials then were criticized for considering the price surge as “transitory” and tightening policy too late to prevent inflation from eclipsing 9% at one point.
“I was never on team transitory during Covid,” Bessent said. “We’ll get to the other side of this, and I don’t know whether it’s a few days or a few weeks, and energy inflation will come back down.”
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