US Treasury Secretary Warns on Rates Amid Energy Shock

US Treasury Secretary Scott Bessent has requested that the Federal Reserve avoid further interest rate hikes. This request comes in response to the energy supply shock triggered by the conflict between the United States and Iran. Bessent states that the monetary authority should look toward the future landscape rather than focusing solely on past data.

The financial market holds a different view from Treasury officials. The CME FedWatch tool points to an 89.4% probability of a rate hike to the 4.00% to 4.25% range at the December meeting. Inflationary pressure is fueled by the 20.4% rise in energy prices recorded through September.

The Federal Reserve kept the current interest rate between 3.75% and 4% at its last meeting. Since the conflict began, the US central bank has implemented five holds and one increase. The US economy has shown resilience with the creation of 165,000 jobs in October.

Some central bank officials diverge from the Treasury's position. Governor Christopher Waller declared support for a 0.25 percentage point increase at the next meeting. The final decision depends on the analysis of the consumer price index and recent inflation dynamics.

The scenario of geopolitical uncertainty and the divergence between the Treasury and the central bank increases volatility in risk assets and may pressure the dollar against other global currencies.