US Treasury Secretary Scott Bessent says the Federal Reserve should be reviewed.
Bessent said the central bank was “fear mongering” about the potential for tariffs to cause inflation.
Markets will need to “wait and see” what happens to the Fed once Powell’s term is up, he added.
Donald Trump may have backed away from reports that he could soon fire Federal Reserve Chair Jerome Powell, but the administration isn’t turning down the heat on the central bank chief.
Treasury Secretary Scott Bessent weighed in on the drama swirling around President Donald Trump and the central bank. Authorities should be looking into the Fed’s efficacy, he said, when asked for his opinion on whether Trump should remove Fed Chair Powell from his post.
“I think that what we need to do is examine the entire Federal Reserve institution and whether they have been successful,” Bessent said in a TV interview with CNBC on Monday. “We should think, ‘Has the organization succeeded in its mission?’ If this were the FAA, and we were having this many mistakes, we would go back and look at why has this happened,” Bessent said.
Bessent also had issues with the Fed’s reaction to Trump’s tariffs. Speaking at a European Central Bank panel earlier this month, Powell previously said that the Fed would have cut rates already this year were it not for Trump’s tariff policies.
“There was fear-mongering over tariffs, and thus far, we have seen very little, if any, inflation. We’ve had great inflation numbers. I think this idea of them not being able to break out of a certain mindset. All these PhDs over there — I don’t know what they do,” Bessent added of Fed economists.
Economists have warned that tariffs could raise inflation since Trump started his trade war earlier this year. Goods inflation has already started to drift higher, with the prices for durables rising 0.7% year-over-year in June, the second-straight month of growth after more than two years of annualized declines, according to the latest consumer price index report.
Fed drama
Bessent’s comments add to the pressure campaign that’s been waged against the central bank this year.
Dismayed at the lack of rate cuts from the Fed, Trump has bashed Powell and repeatedly called on the Fed to lower interest rates. He reportedly told Republican lawmakers last week he could fire Powell “soon,” before denying that he had plans to oust him.
A separate report from The Wall Street Journal claimed that Bessent privately urged Trump not to fire the Fed Chair, pointing to the potential impact on markets. Bessent denied that he had a hand in talking Trump out of fired Powell.
“I’m not sure who the leaker was, but the problem with leakers is they only have partial information,” Bessent said of the Journal’s report. “President Trump solicits a whole range of opinions and then makes a decision. So he takes a lot of input and at the end of the day, it’s his decision.”
The Fed is also facing backlash from the Trump administration for its $2.5 billion building renovation, which Powell defended in a public letter to the director of the Office of Management and Budget last week.
“Chair Powell’s term ends in May. There’s also another seat coming up in January. So we’ll see,” Bessent said.
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