Treasury Secretary Scott Bessent defended Federal Reserve Chair Kevin Warsh's near-silence on interest-rate policy as intentional, even as economists warn the approach is deepening doubts about the Fed's inflation fight. The Fed held rates steady for a fifth straight meeting, and rising bond yields suggest markets aren't fully convinced.
Federal Reserve Chair Kevin Warsh has told reporters almost nothing about where he plans to take interest rates next, and that silence is fueling debate rather than confidence. Treasury Secretary Scott Bessent defended the approach Tuesday, telling CNBC it marks a shift in how the Fed communicates.
Bessent Defends the Fed's Silence
Bessent argued markets have grown too dependent on explicit Fed signaling. According to MarketWatch, he said: "I think of this as a detox, for both the financial markets and financial journalists", describing Warsh's strategy of not hinting at the direction of rate policy. Bessent also said he wasn't convinced rates needed to rise at all, noting an increase would take a year or more to affect the economy.
The Fed itself hasn't moved. Policymakers voted 9-3 to hold rates unchanged in a range of 3.5% to 3.75% for a fifth consecutive meeting, even as Warsh maintains he's committed to returning inflation to the Fed's 2% target.
Bond Market Signals Doubt
Not everyone is buying the strategy. BMO Capital Markets chief economist Douglas Porter said Warsh's tough talk on inflation came with no indication that any action was imminent. BofA's Mark Cabana went further, comparing Warsh to someone vowing to lose 15 pounds without a diet or exercise plan, arguing bond investors, not statements, will decide whether the Fed is credible.
Former New York Fed President Bill Dudley said the rise in long-bond rates signaled a loss of credibility for the central bank, which makes the Fed's job harder because the market demands higher rates when it doubts the central bank. Apollo chief economist Torsten Slok said the lack of clarity pushed yields higher because investors now see a risk that fighting inflation could take longer or involve a policy mistake.
Trump Ties Add Scrutiny
Some economists say Warsh faces sharper scrutiny than past Fed chairs because of his perceived closeness to President Donald Trump, even as the Fed operates independently from the White House. FAO Economics chief economist Robert Brusca said suspicion will probably persist until Warsh demonstrates he isn't simply doing Trump's bidding.
Bessent's public backing shows the White House is standing by its pick, even as the rise in bond prices raises the government's borrowing costs and could slow the economy.
Source: MarketWatch
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