Treasury chief Bessent says another Fed rate hike would not be a mistake

U.S. Treasury Secretary Scott Bessent said that further interest rate increases by the Federal Reserve would not necessarily be a policy error. His remarks arrived shortly after the central bank chose to hold interest rates steady at its October meeting.

Central bank policy and energy prices

The Fed kept rates unchanged after raising borrowing costs a month earlier, which was its first increase in three years. Market traders in Fed funds futures broadly expect policymakers to resume rate hikes at their December gathering.

President Donald Trump has frequently called for lower borrowing costs and previously pushed former Fed Chair Jerome Powell on the issue. However, Bessent noted that both he and Trump support current Fed Chair Kevin Warsh. Bessent stated that Warsh can balance stable prices with full employment.

Bessent urged the central bank to keep an open mind regarding rising energy costs, describing the price spike as potentially temporary. A conflict involving the U.S. and Iran has reduced global crude oil production, pushing inflation further above the central bank’s 2% goal. Bessent reported that U.S. sanctions under Operation Economic Outcast are working, citing internal forecasts that Iran’s economy could shrink by up to 25% within twelve months.

Tech debt and neoclouds

Bessent also addressed concerns regarding bond yields tied to artificial intelligence debt. Market attention recently turned to neoclouds, which are specialized cloud infrastructure providers built to support AI computing workloads.

Tesla head Elon Musk previously cautioned that over 200 neocloud companies face failure and industry consolidation. Bessent dismissed these concerns, stating that these providers represent only a minor slice of the tech landscape. He noted that transactions and debt financing in the sector continue to close without major disruption.