Bessent's reaction function has also shifted less dovish. His comments this year implied the Fed should continue to stay on hold because he expects inflation—net of energy—to continue to be "very tame." Earlier this year, Bessent cited models implying that the Fed was anywhere from more than 25 to more than 100 bps above neutral Jan 8, prepared remarks: "The White House can only do so much; at a certain point, the Federal Reserve must also do its part to spur investment," and later in Q&A: "I think that we are still substantially above the neutral rate, and I think that we should not be in restrictionary mode." On CNBC today (Aug 4), he made two arguments. First, he defended Warsh's decision not to articulate any reaction function last week: "I think of this as a detox that the, both the financial markets, financial journalists, ... especially in print, had just become stenographers. And same for many of the Wall Street firms.... I think we are seeing a detox here and all this with forward guidance that I think every meeting should be live and that market participants should make their own judgments..., I think Chair Warsh wants to maintain optionality for optimal outcomes, and I am sure that under his leadership, the Fed will balance between their growth mandate and their inflation mandate." Second, he did lay out a reaction function that could be described as dovish and calls for looking through recent shocks: "What does an increase in the short-rate actually do? We'll see on that." He poses the question but then answers by pointing to how underlying inflation is "very tame ... very quiescent. And I think we're going to continue to see that." The full exchange: "KERNEN: Will the promise of A.I. in terms of productivity, will that arrive quickly enough for Chair Warsh to bring down the inflation rate in a way other than trying to slow the economy with higher rates? BESSENT:  Well, I think we have to look and think, what does an increase in the short-term rate actually do? So, we'll see on that. But the other thing too is I think that there are a lot of short-term indicators here, much of it energy-related, that will work its way through the system. When energy, when we had the MOU with the Iranians in early June, you know, from June, for the June inflation numbers, we saw one of the biggest drops in years. So, you know, there's a very noisy component in there. But what gives me the confidence is that the underlying numbers, they are very tame. So, core inflation away from the fast-moving segments that are impacted by energy have been very quiescent. And I think we're going to continue to see that."(Nick Timiraos)