'Don't hike rates': US Treasury Secretary Bessent warns Fed against rate increase amid Iran war

US Treasury Secretary Scott Bessent has told the Federal Reserve not to raise interest rates because of an “energy supply shock” linked to the US-led conflict with Iran. In an interview on Friday, Bessent said, "I think the Fed should understand that this is an energy supply shock."

“So I think that to hike too much into an energy supply shock when it’s coming down, these are very noisy numbers,” he said. “The Fed’s supposed to look into the future, not look in the rearview mirror," Bessent added.

At its last policy meeting, the central bank kept interest rates unchanged, leaving them at 3.75 to 4 per cent. According to the CME FedWatch, there is an 89.4 per cent chance that rates will be increased to 4.00–4.25 per cent at the next meeting, scheduled for December 9.

Inflationary pressures

The Federal Reserve has kept interest rates steady despite pressure from the White House to cut them, amid inflationary pressures stemming from the US-Israeli war on Iran. Since the conflict erupted, the central bank has held rates steady on five occasions and raised them once.

Energy costs have been a major driver of this pressure, climbing 20.4 per cent year-over-year as of September. While October’s energy figures have now come out, the Labour Department couldn’t gather comparable data from October 2025 due to that year’s government shutdown, leaving no basis for a year-over-year comparison this October.

Bessent’s comments follow a jobs report that exceeded expectations, strengthening arguments for raising rates. The Labour Department reported last Friday that the economy gained 165,000 jobs in October. “I’m not going to tell the Fed what to do. I am going to say they should have an open mind,” Bessent remarked.

He pointed out that the Fed had cut rates three times during the same stretch last year, adding that reversing course sharply just because of an energy supply shock isn’t a move he’d make if he were on the Fed “But I’m not on the Fed.”