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Scott Bessent has never been a fan of the Federal Reserve’s forecasting habit. Now, as US Treasury Secretary, he’s saying the quiet part out loud: the Fed’s forward guidance isn’t just unhelpful, it’s actively misleading markets.
The numbers behind the criticism
In a Spring 2025 interview, Bessent laid out his case with receipts. The Fed’s two-year forward GDP projections overstated growth by 7.6% between 2010 and 2016. The average error in two-year GDP forecasts came in at 1.1 percentage points. When actual GDP growth averaged around 2%, the forecasting error represented roughly 58% of the real number.
Then there’s inflation. The Fed’s projections missed the 2021 PCE inflation rate by 4 percentage points. Bessent didn’t mince words. He called the SEP an “embarrassment” and said it should be abolished entirely.
From trader to Treasury: a consistent skeptic
Before joining the administration, Bessent’s trading strategy reportedly involved taking opposing positions to the Fed’s own guidance.
Bessent’s views also dovetail with those of Kevin Warsh, who has been discussed as a potential future Fed Chair nominee. Warsh has long advocated for stripping back forward guidance and replacing it with a framework centered on real-time economic data rather than multi-year projections.
What this means for investors
The dot plot, that chart showing where individual Fed officials expect interest rates to land in coming years, has become one of the most closely watched releases in finance. Traders build entire positioning strategies around it. Remove it, and you remove a major anchor for interest rate expectations.
The key variable to watch is whether Warsh actually gets nominated to lead the Fed and whether these ideas survive contact with the institutional inertia of the Federal Reserve System.
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