Timiraos: Bessent Sounds Less Dovish, Backs Holding Rates Steady

ME News reported that on Aug. 5 (UTC+8), Nick Timiraos—often dubbed the Fed's "voice"—wrote that U.S. Treasury Secretary Bessent's policy reaction function has shifted and is now less dovish. Comments he has made this year point to the view that the Federal Reserve should keep interest rates at current levels. Earlier this year, Bessent cited model estimates suggesting the policy rate could be 25 to more than 100 basis points above the neutral rate. Speaking on Aug. 4, Bessent laid out two positions. First, he defended Walsh's decision last week not to spell out any policy reaction function, saying each meeting should remain open and investors should form their own judgments, adding that Walsh likely wants to retain flexibility to achieve the best outcome. Second, he outlined what could be read as a dovish approach, arguing that recent shocks should be looked through: "What impact will rising shortterm rates actually have? We'll have to wait and see." He followed by saying underlying inflation is "very mild" and "very stable," and added that core inflation—excluding volatile components heavily influenced by energy—has remained stable and should continue to do so. (Source: BlockBeats)