US Treasury Secretary Bessent called on Europe to make additional supplies available and accelerate delivery on existing commitments.

Bessent's call to Europe

The statement from Treasury Secretary Bessent underscores a push for European partners to take concrete steps on two fronts: expanding the availability of additional supplies and moving faster on commitments already in place.

Treasury Secretary Scott Bessent stated that the Federal Reserve should keep an "open mind" regarding interest rates, arguing that artificial intelligence-driven productivity and deregulation efforts are helping to contain inflation. Speaking on Fox News' Sunday Morning Futures, Bessent emphasized that these supply-side factors allow growth to accelerate without triggering sustained price increases.

Greenspan-era parallel cited

Bessent drew a comparison to the era of former Fed chair Alan Greenspan, noting that the central bank allowed economic activity to run hot due to productivity gains associated with the internet. He asserted that current productivity improvements from AI are "probably the same kind of gains, if not more substantial now." The Treasury Secretary argued that deregulation has expanded supply sufficiently to absorb private-sector demand shocks, contrasting this with what he described as regulatory constriction during the Biden administration that contributed to inflation.

Oil shock widens core-headline gap

The divergence between headline and core inflation was a central theme of Bessent's commentary. He described core inflation as "very quiescent," attributing elevated headline figures primarily to energy prices driven by geopolitical tensions in Iran. Bessent predicted that oil prices would fall once the conflict resolves, pulling headline inflation back toward core levels.

What the numbers show

The data reveals a significant 100 basis point gap between headline consumer price inflation at 3.4% and core inflation at 2.4%. This spread is largely driven by the 16.3% surge in energy prices, which is directly linked to the conflict in Iran rather than underlying domestic demand pressures. Bessent's argument hinges on the premise that this energy shock is transitory; if oil prices normalize as predicted, headline inflation could converge with the lower core rate, potentially reducing pressure on the Federal Reserve to maintain restrictive monetary policy.

Fed policy stance

Earlier this month, the Federal Reserve raised its benchmark interest rate by 25 bps to a range of 3.75%-4.00%, marking the first hike since 2023. President Donald Trump's choice for Fed chair, Kevin Warsh, was described by Bessent as being "well aware" of the productivity gains. Trump has separately predicted that oil prices will fall "precipitously" after the U.S. wins its war with Iran, forecasting gas prices dropping to $3 per gallon before falling below $2.