Bessent Urges Fed Flexibility on Inflation

U.S. Treasury Secretary Scott Bessent on Sept. 27, 2026 urged Federal Reserve policymakers to maintain an “open mind” on future interest-rate decisions and the U.S. inflation outlook. In a televised interview, he framed his comments around the need for flexibility as the central bank digests new economic data. His remarks highlight the administration’s view that monetary policy should account for evolving structural forces in the economy.

Bessent did not prescribe a specific interest-rate path, instead emphasizing that policymakers should avoid rigid assumptions about how growth translates into inflation. He presented his case in the context of what he described as a strong U.S. economy, arguing that the current environment may differ from past cycles because of underlying productivity trends.

Bessent characterized recent inflation dynamics as relatively contained. He said that core inflation has been “very quiescent” and noted that it has “actually dropped over the past few months.” This description suggests that, in his view, underlying price pressures have eased even as the broader economy has remained solid.

By focusing on core inflation, which excludes more volatile components such as food and energy, Bessent underscored the distinction between short-term price swings and longer-term inflation trends. He implied that these core measures provide a more stable basis for assessing how much inflation risk should factor into interest-rate decisions.

A central element of Bessent’s argument is that structural shifts in the economy are helping to restrain inflation. He cited productivity gains from artificial intelligence as a key factor that can enable faster growth without generating significantly higher inflation. In his view, these gains enhance the economy’s capacity to produce goods and services, easing price pressures.

Bessent also pointed to deregulation and recent tax cuts as additional supports for economic strength. He argued that these policies, together with technology-driven productivity, can bolster output while mitigating inflation risks. This combination, he suggested, should be taken into account by the Federal Reserve when determining the appropriate stance of monetary policy.

To illustrate his perspective, Bessent compared current economic gains to those seen during the 1990s internet boom. He said Fed Chair Kevin Warsh is “well aware” of similar or even greater gains occurring now. By invoking that period, he referenced an earlier era when strong growth coincided with manageable inflation.

Bessent further alluded to the Greenspan-era approach of allowing growth to “let things run,” using it as a historical touchpoint for how policymakers might weigh robust activity against inflation concerns. His comments collectively signal a preference for a Fed posture that recognizes the potential for higher growth with contained inflation, while remaining responsive to incoming data rather than following a predetermined course.