Bessent Backs Warsh's Push to Kill the Fed Dot Plot
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- Treasury Secretary Scott Bessent applauded Fed Chair Kevin Warsh's plan to eliminate forward rate guidance, calling it "a crutch that market participants have started leaning on."
- Bessent endorsed Warsh's decision not to submit a dot plot with quarterly projections, saying "the dots are always wrong" and recalling that his old trading model profited by betting against them.
- After his first policy meeting, Warsh announced a task force of Fed staff and outside experts to review communications practices, including the dot plot the Fed has published four times a year since 2012.
- The latest dot plot showed half of Fed policy-makers believe they'll need to raise the policy rate this year.
- Bessent said policy-makers should keep an open mind on the inflation impact of the Iran conflict, noting energy prices are "abating amid negotiations" as tankers pass through the Strait of Hormuz more smoothly.
- Bessent argued AI-driven productivity gains will allow higher growth alongside a return to the Fed's 2% inflation target: "we can have a high GDP economy without the traditional inflation seeping in."
- Bessent said a stronger dollar does not require higher rates, attributing dollar strength to a widening rate differential with weaker economies and U.S. growth "pulling away from the rest of the world" during the Iran conflict.
Why it matters: Bessent's vocal backing gives Warsh political cover to formally dismantle the dot plot — a tool markets have anchored on for 13 years — while tying the Fed's inflation outlook to two variables (Iran energy prices, AI productivity) that cut both ways for the rate path. If half the FOMC still expects a rate hike this year but guidance goes dark, traders lose their primary forecast signal and must reprice Fed expectations off data alone.
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