Treasury Secretary Scott Bessent is anticipating a period of “substantial disinflation” in the near future, even as recent economic reports indicate persistent price pressures. His optimistic forecast comes as Kevin Warsh is set to assume the role of Federal Reserve Chair, taking over from Jerome Powell. Bessent suggests that while a couple more “hot inflation numbers” might be on the horizon, a significant easing of price increases is expected to follow.

A key factor in Bessent’s outlook is his belief that the recent surge in energy-driven inflation is poised for reversal. He highlighted ongoing U.S. oil production efforts, which he believes will mitigate supply shocks stemming from the conflict in Iran. The Treasury chief emphasized his conviction that “nothing is more transient than a supply shock,” noting that core inflation had been trending downwards before the Iranian conflict began, a trajectory he expects to resume. His comments were made during President Donald Trump’s summit with Chinese counterpart Xi Jinping.

However, current economic indicators present a challenging picture. Recent data revealed that consumer prices climbed 0.6% in April, with core costs (excluding food and energy) still rising 0.4%. Over a twelve-month period, overall inflation stood at 3.8%, while core inflation was at 2.8%. Wholesale prices, often seen as a precursor to consumer price trends, also surged 1.4%, pushing their annual rate to 6%, the highest since late 2022. Import and export prices likewise registered their highest levels in approximately four years, reflecting broad inflationary pressures.

Bessent drew a clear distinction between the current inflationary environment and the surge experienced in 2021-2022. He noted that the earlier period was characterized by unprecedented fiscal and monetary stimulus following the Covid pandemic, creating significant supply and demand imbalances, further exacerbated by the Russian invasion of Ukraine impacting energy markets. Unlike many officials who initially deemed the post-Covid inflation “transitory,” Bessent stated he was “never on team transitory” during that time. He remains confident that the current energy inflation will subside, predicting its decline within “a few days or a few weeks.”