The U.S. Treasury secretary, Scott Bessent, has expressed his opposition to the Federal Reserve responding with excessive tightening of interest rates to inflationary pressures linked to the volatility of energy prices. In his view, the U.S. central bank "should have an open mind" and assume that the current situation is mainly the result of a supply crisis.
"I'm not going to tell the Federal Reserve what to do. I’m going to say they should have an open mind," the Treasury official said in an interview granted to the CNBC network, cited by Europa Press. In this conversation, he brought up the European Central Bank (ECB) precedent in 2008, when the institution then led by Jean Claude Trichet decided to raise interest rates during the midst of the surge in crude oil during the global financial crisis.
"One of the biggest mistakes of all time was the one the ECB made in the summer of 2008, when crude oil shot up to 147 dollars. The ECB panicked and raised interest rates during the global financial crisis," Bessent recalled, insisting that the Fed should interpret the current episode as an energy supply crisis and not respond with a sharp turn in its policy.
Against this backdrop, and after the three interest-rate cuts approved by the Federal Reserve last year in the same period, the Treasury secretary considers that reversing now in such an aggressive way the monetary stance due to an energy supply shock "is not something I would do if I were in the Federal Reserve, but I'm not in the Federal Reserve".
At the same time, Bessent has highlighted the strength of financial markets, pointing to the high demand for U.S. Treasury bonds, as well as the good tone of the economy, which "is very strong," with job creation both in small and large companies. All this leads him to conclude that "the economy is in very good shape" and that "there is nothing that worries me right now".
For this reason, he has warned of the dangers of pushing the price of money too high amid an energy supply crisis, with a dwindling supply and especially unstable data. He added that next week there will likely be a more established reference, and therefore urged the Fed to "look to the future, not through the rearview mirror."
Bessent’s words come just a few days after Christopher Waller, a member of the Federal Reserve’s Board of Governors, showed himself willing to support an increase in the benchmark rate at the meeting scheduled for within a month, even going so far as to consider an increase of up to 50 basis points if inflation continues at current levels.
Pressures on Megaspeed and the Nvidia case
On the other hand, the Treasury secretary has revealed that his Department, together with the Department of War, the Office of the United States Trade Representative (USTR) and the Department of State, defended “for months” the inclusion of Megaspeed in the list of restricted entities. It is the technology company and client of Nvidia involved in the recent scandal that led to the resignation of Jensen Huang, in part because of his link to a businesswoman connected to the firm based in Singapore and who is said to have acted as a spy for the Government of China.
“They were in favor of including Megaspeed in the list of restricted entities for months, but the Department of Commerce has the power to decide, along with the Office of Industry and Security (BIS),” Bessent said, referring these bodies to clarify their internal procedures.
“I think we have all the necessary powers; we just need to implement them,” he added, in a veiled criticism of the Commerce secretary, Howard Lutnick.
Alice Huang, the central figure in the controversy surrounding Nvidia and accused of spying for China, maintained ties with Megaspeed International, which has stated that it takes its obligations regarding compliance with U.S. export control regulations with the utmost seriousness, stressing that it constitutes an essential priority for the company.
“Megaspeed has cooperated with the inspections of the Office of Industry and Security (BIS) of the U.S. Department of Commerce and is prepared to cooperate fully with any other relevant U.S. governmental authority,” James Tan Yong Pong, president and CEO of Megaspeed International, said yesterday.
Along these lines, the Singapore-based company has said that it welcomes scrutiny from authorities and commits to demonstrating, through concrete measures, that it acts responsibly, transparently, and in accordance with applicable U.S. law.
In addition, to strengthen its compliance policy, Megaspeed has hired "a prestigious U.S. law firm" with the aim of carrying out a detailed inventory of its graphics processing units (GPUs) and independently certifying that its practices comply with export control regulations.