Bessent Pressures Fed with AI

Key Takeaways

• The US Treasury wants the Federal Reserve to treat AI as a reason for patience on rates.
• The Fed has just raised rates, with inflation still running above target.
• Fuel costs versus productivity gains is the call that shapes gold and bitcoin.

US Treasury Secretary Scott Bessent has urged the Federal Reserve to keep an "open mind" on interest rates as artificial intelligence promises to lift productivity. Speaking on Fox News on Sunday 27 September 2026, he argued that new technology and deregulation could allow the US economy to grow faster without the inflation normally associated with a boom (Bloomberg, via The Spokesman-Review, 27 September 2026). He drew a comparison with the 1990s, when the Fed allowed the internet-driven expansion to continue, saying then chair Alan Greenspan "let things run".

The timing is pointed. On 16 September 2026, the Fed raised its target rate by a quarter of a percentage point to a range of 3.75% to 4%, citing inflation that remained elevated despite solid growth and strong productivity (The Guardian, 16 September 2026). August consumer prices rose 3.4% from a year earlier, with energy prices up 16.3%. Inflation excluding food and energy was 2.4% (US Bureau of Labor Statistics data released 11 September 2026). Bessent sees room to distinguish the effect of higher fuel costs from broader price pressure, describing core inflation as "very quiescent". The Fed must also consider how long those costs will last and whether they will spread through the economy.

AI makes that judgment harder. Building data centres and buying the equipment to run them creates demand now, while the efficiency gains may take years to appear across businesses. The investment boom could add to near-term pressure on resources even if the technology ultimately makes the economy more productive. Strong growth alone will not tell policymakers which effect is dominant.

For investors, the distinction matters beyond the next rate decision. If energy pressures ease and productivity continues to improve, expectations for interest rates and real bond yields could shift, with consequences for gold. Bitcoin could be particularly sensitive to any change in liquidity and appetite for risk. Persistent fuel inflation would leave the Fed with less room to respond to the growth story and could keep financial conditions tight. For Australians holding metal through Ainslie Bullion or digital assets through Ainslie Crypto, the same debate sits behind both positions.

Bessent is asking policymakers to allow for a larger expansion in the economy's productive capacity. September's rate rise shows that the Fed still wants convincing evidence that stronger output is containing inflation, with Fed chair Kevin Warsh saying on 16 September that "the plain fact is that inflation is too high and has been for too long" and that the summer's readings did not show underlying trends had meaningfully improved. Coming inflation and productivity data will test whether the promised gains are reaching the wider economy quickly enough to change the policy debate.

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