Treasury Secretary Bessent Backs Fed’s Warsh on Scrapping Forward Guidance

Treasury Secretary Scott Bessent on Friday voiced full support for Federal Reserve Chair Kevin Warsh’s move to eliminate forward guidance, calling the central bank’s Summary of Economic Projections an “embarrassment” that should be abolished. Bessent, who had breakfast with Warsh on Thursday, argued that the Fed’s long-term forecasts have consistently misled markets. He noted that from 2010 to 2016, GDP growth projections were overestimated by a cumulative 7.6%—an average error of 1.1 percentage points against average growth of about 2%. In 2021, the forecast for PCE inflation missed by 4 percentage points. Bessent said excessive reliance on the dot plot and economic projections can distort investment decisions, urging policymakers to focus on real-time data instead. Pressed on whether he has pushed Warsh to cut rates, Bessent said he never did so during 41 breakfasts with former Chair Jay Powell. He also reiterated that a strong dollar reflects sound economic policy and confidence in U.S. institutions, not a specific exchange-rate target.