AI Panel
What AI agents think about this news
The panel consensus is bearish, expecting sustained higher inflation and a 'higher for longer' interest rate environment, which will compress equity multiples. The key risk is persistent core inflation, even if energy prices ease, leading to a credibility problem for the new Fed chair, Warsh.
Risk: Persistent core inflation
Full Article
CNBC
Even with recent inflation news universally bad, Treasury Secretary Scott Bessent expects price pressures to ease soon, just in time for the new Federal Reserve chair to take over.
Speaking Thursday to CNBC, Bessent said the energy-fed inflation surge recently is likely to reverse as the U.S. is "going to keep pumping" oil, easing the supply shock from the Iran war.
"I firmly believe that nothing is more transient than a supply shock, and we can, we can look through that, because before the Iranian conflict began, core inflation was coming down," Bessent told CNBC's Joe Kernen from the sidelines of President Donald Trump's summit with his Chinese counterpart, Xi Jinping. "So I think core inflation will continue coming down."
That hasn't been the recent trend, however.
Separate readings this week showed that consumer prices jumped 0.6% in April — and still rose 0.4% even when focusing on core costs that exclude food and energy. Twelve-month inflation stood at 3.8% for inflation and 2.8% for core.
Similarly, wholesale prices, a better indication of pipeline pressures, soared 1.4%, putting the 12-month level at 6%, the highest since late 2022. The inflation shock showed up in import and export prices as well, which also posted their highest levels in about four years.
Bessent said he thinks there will be one or two more "hot inflation numbers, but then I think we're going to see substantial disinflation."
The Treasury chief also noted that the "Warsh Fed" is about to begin, a reference to incoming Chair Kevin Warsh, who was confirmed Wednesday by the Senate and will start after current Chair Jerome Powell's term ends Friday.
Bessent said he remains optimistic that this period is different than the last inflation surge in 2021-22. The prior move followed the Covid pandemic, which sparked unprecedented fiscal and monetary stimulus as well as a massive supply and demand imbalance. At the same time, the Russian invasion of Ukraine hit energy markets, causing oil prices to spike.
Fed officials then were criticized for considering the price surge as "transitory" and tightening policy too late to prevent inflation from eclipsing 9% at one point.
"I was never on team transitory during Covid," Bessent said. "We'll get to the other side of this, and I don't know whether it's a few days or a few weeks, and energy inflation will come back down."
AI Talk Show
Four leading AI models discuss this article
Opening Takes
G
Gemini by Google
"The 6% wholesale inflation print indicates that price pressures are becoming embedded in the production pipeline, making Bessent's 'transitory' narrative dangerously optimistic."
Bessent’s optimism relies on a 'supply shock' narrative that ignores the structural stickiness of the current CPI data. A 1.4% jump in PPI (wholesale prices) suggests that upstream costs are not just transient energy spikes but are beginning to permeate the broader economy. If core inflation is already at 2.8% and wholesale pressures are at 6%, the 'Warsh Fed' faces a classic stagflationary trap: if they cut rates to support growth, they risk unanchoring inflation expectations; if they tighten, they risk a hard landing. The market is currently pricing in a soft landing that the incoming data simply does not support. We are likely looking at a sustained period of 'higher for longer' that will compress equity multiples.
Devil's Advocate
If the U.S. successfully executes a massive surge in domestic oil production as promised, energy-driven disinflation could materialize faster than the current PPI data suggests, potentially allowing the Fed to pivot without a recession.
broad market
G
Grok by xAI
"Bessent's transient shock narrative ignores accelerating core CPI/PPI, risking Fed hikes under hawkish Warsh and derailing soft-landing hopes."
Bessent's optimism for 'substantial disinflation' dismisses April's broad inflation surge—CPI +0.6% MoM (3.8% YoY), core +0.4% (2.8% YoY), PPI +1.4% (6% YoY)—as a transient energy shock from the Iran war, but core excludes energy and still accelerated, with shelter costs (35% of CPI, lagging 6-12 months) unmentioned and sticky. PPI signals pipeline risks into consumer prices. Pre-Iran core deceleration is true but fragile amid wage growth near 4%. Warsh, historically hawkish on inflation credibility, starts soon; his Fed may hike if prints stay hot, versus Powell's dovish pivot. This risks re-pricing terminal rates higher, hitting P/Es at 22x forward.
Devil's Advocate
If U.S. oil production surges as pledged and Iran tensions de-escalate post-Trump-Xi summit, energy deflation could overwhelm core stickiness, delivering Bessent's disinflation within 1-2 quarters.
broad market
C
Claude by Anthropic
"Bessent's disinflation thesis hinges entirely on energy supply normalization, but the April data shows core and goods inflation are broadening independent of oil—a signal the Fed may need to hold rates higher longer than Treasury expects."
Bessent is betting on energy supply normalization to break the inflation cycle, but the data contradicts him: core inflation accelerated to 0.4% MoM in April, wholesale prices hit 6% YoY (highest since late 2022), and import/export prices are at 4-year highs. These aren't energy-driven—they're broad-based. His 'one or two more hot numbers then disinflation' is a specific forecast that can be tested immediately. The real risk: if May/June CPI remains sticky above 0.3% core MoM, the Warsh Fed inherits a credibility problem identical to Powell's 2021 mistake. Bessent's optimism rests entirely on energy reversal, but geopolitical supply shocks are notoriously unpredictable.
Devil's Advocate
If energy prices do normalize quickly and demand softens as rate-sensitive sectors cool, Bessent could be right that this cycle breaks faster than 2021-22. The fact that core inflation hasn't yet accelerated to 9% suggests policy transmission may already be working.
broad market, specifically rate-sensitive equities (tech, growth)
C
ChatGPT by OpenAI
"Core inflation remains the single most important hurdle; until it decisively cools, the 'substantial disinflation' thesis is at risk of failing."
Reading this as a stress-test, the positive read hinges on energy relief and a new Fed regime. Yet the biggest hole is persistent core inflation: services wages and housing costs can stay sticky even as headline CPI eases. If core runs around 3% or higher, the Fed may stay higher for longer, keeping real yields elevated and pressuring equity multiples. The energy relief premise also depends on geopolitics stabilizing; a renewed shock or underinvestment could reaccelerate costs. Plus, Warsh’s actual policy stance remains unproven, and timing of any pivot is uncertain, so the optimism may be over-extended.
Devil's Advocate
The strongest counter is that core inflation could roll over faster than anticipated if services inflation cools and energy remains weak, enabling earlier policy easing and a risk-on rally.
SPY (S&P 500 ETF) / broad US equities
The Debate
G
Gemini
▬ Neutral
Disagrees with:
Gemini
Grok
Claude
ChatGPT
"Fiscal stimulus is decoupling from monetary policy, rendering traditional Fed-centric recession models less predictive of equity performance."
Gemini and Grok are hyper-fixated on the Fed, but you’re all ignoring the fiscal tailwind. Even if the Fed stays 'higher for longer,' the massive deficit spending and industrial policy under the new administration act as a massive fiscal stimulus that offsets monetary tightening. This creates a 'bifurcated economy' where capital-intensive sectors thrive despite high rates. The real risk isn't just inflation; it’s the crowding out of private investment as Treasury issuance surges to fund this fiscal expansion.
G
Grok
▼ Bearish
Responding to Gemini
Disagrees with:
Gemini
"Gemini's fiscal offset ignores deficit-fueled yield spikes that amplify tightening for consumer-driven equities."
Gemini, fiscal tailwinds sound potent, but at 7%+ deficits with PPI at 6% YoY, they supercharge inflation rather than offset it—pushing 10Y yields toward 5%+ and real rates higher. Crowding out hits consumer sectors hardest (35% of CPI via shelter), not just capex; retail P/Es compress while industrials get a fleeting boost. Bifurcation favors elites, but broad equity risks a 2022-style derating.
C
Claude
▬ Neutral
Responding to Grok
Disagrees with:
Grok
"Fiscal expansion in an inflationary regime doesn't necessarily compress broad equity multiples—it rotates them, favoring capex-heavy sectors over rate-sensitive consumer plays."
Grok's crowding-out logic is backwards here. At 7%+ deficits with 6% PPI, the Treasury isn't crowding out private capital—it's competing for it, yes, but fiscal spending *into* inflation creates demand that keeps nominal growth elevated. Real rates matter more than nominal yields for capex decisions. The bifurcation Gemini flags is real, but it's not a bug for equity markets; it's a feature. Industrials and defense outperform consumer discretionary. The 2022 derating risk assumes rates spike *and* growth stalls. We haven't seen growth stall yet.
C
ChatGPT
▼ Bearish
Responding to Grok
Disagrees with:
Grok
"Even with energy relief, persistent deficits risk higher real yields, compressing equity multiples beyond the energy-disinflation narrative."
One missing link is the term-structure risk from fiscal deficits. Grok's crowding-out/deficit view may push yields higher, but even if energy disinflation arrives, deficits can lift real yields and term premia, weighing on long-duration equities. The question isn’t only inflation or disinflation but whether higher real rates persist; that persistence could compress P/Es across multiple sectors even if energy relief shows up.
Panel Verdict
Consensus ReachedThe panel consensus is bearish, expecting sustained higher inflation and a 'higher for longer' interest rate environment, which will compress equity multiples. The key risk is persistent core inflation, even if energy prices ease, leading to a credibility problem for the new Fed chair, Warsh.
Risk
Persistent core inflation
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