Bessent Sees Substantial Disinflation Ahead as Warsh Fed Era Begins
CNBC reported Thursday that Treasury Secretary Scott Bessent expects substantial disinflation to arrive soon, even as the latest batch of price data delivered a punishing surprise to markets and policymakers alike.
Bessent’s Optimistic Call on Prices
Speaking to CNBC from the sidelines of President Donald Trump’s summit with Chinese President Xi Jinping, Bessent acknowledged the recent surge in prices. He argued the spike is almost entirely energy-driven and will fade quickly. The U.S. is committed to keeping oil output high, he said, which should relieve supply pressure stemming from the ongoing conflict involving Iran. Bessent told CNBC he anticipates one or two additional hot inflation readings before a pronounced downward turn takes hold.
His core argument rests on a pre-conflict trajectory. Before hostilities escalated, underlying price pressures were already moderating, he noted. That trend, Bessent contends, will reassert itself once energy markets stabilise.
The Numbers Tell a Different Story for Now
The optimism is a hard sell against the current data. April’s consumer price index rose 0.6% month-on-month, putting the twelve-month rate at 3.8%. Core inflation, stripping out food and energy, still climbed 0.4% in the month and sat at 2.8% annually. Wholesale prices were even more alarming, surging 1.4% in April and lifting the annual producer price reading to 6%, a level not seen since late 2022. Import and export price gauges matched multi-year highs as well.
A Deliberate Distance From “Team Transitory”
Bessent was careful to separate his outlook from the Federal Reserve’s ill-fated “transitory” call during the 2021-22 inflation surge. That episode saw pandemic-era stimulus collide with supply-chain chaos and an energy shock from Russia’s invasion of Ukraine. The Fed waited too long to act, and inflation eventually topped 9%. Bessent said he was never a believer in that framework and views the current dynamics as fundamentally different in both cause and likely duration.
Warsh Steps In as Powell’s Term Closes
The forecast lands at a pivotal institutional moment. Incoming Fed Chair Kevin Warsh was confirmed by the Senate on Wednesday. He assumes leadership after outgoing Chair Jerome Powell’s term expires Friday. Bessent signalled confidence in what he called the “Warsh Fed,” suggesting the transition arrives at a moment when the worst of the inflation shock may already be peaking. Markets will be watching closely to see whether Warsh signals any shift in the Fed’s current hold-and-wait posture at his first policy meeting.
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