US Treasury Secretary Scott Bessent projected a slowdown in the current quarter due to the impact of the war with Iran, but remained optimistic about the long-term recovery. He stressed that the fundamentals of the US economy remain strong and that the surge in oil prices so far has not drastically affected inflation expectations. The Treasury’s main focus is now to monitor retail gasoline prices to protect consumers.
Bessent also sternly warned gas station operators not to take advantage by maintaining high prices as crude oil prices begin to decline. He promised to ensure price transparency in the domestic market to ensure that the decline in global oil prices is felt by the people. Positive microeconomic data gives him confidence that domestic consumption stability is still intact.
Meanwhile, Cleveland Fed President Beth Hammack stated that current interest rates are “at the right level” and do not require immediate adjustment. She expects the central bank to maintain its current policy for an extended period. However, Hammack acknowledged that the Fed is prepared to act more restrictively or accommodatively depending on future economic data developments.
Hammack identified energy prices as the most critical variable that could disrupt price stability and economic growth. He described supply shocks from the Middle East conflict as a difficult challenge for monetary policy. While the labor market is considered balanced, he acknowledged that consumers have long been burdened by high inflation that has caused the Fed to miss its target for five years.
On the issue of governance, Hammack stressed the importance of the Federal Reserve's independence from political influence amid threats to the central bank's autonomy. He also noted that the long-term impact of artificial intelligence (AI) on the economy is still unclear, but is committed to focusing on the Fed's core task of maintaining macroeconomic stability.
