Scott Bessent floats examination of US Federal Reserve
Treasury Secretary Scott Bessent planned examination of the ‘entire Federal Reserve institution’ comes as Donald Trump dials up pressure on chair Jerome Powell to cut rates.
US Treasury Secretary Scott Bessent says there needs to be an examination of the “entire Federal Reserve institution and whether they have been successful”, as Donald Trump amps up his campaign to heavy the central bank into cutting interest rates.
Speaking on CNBC on Monday, Mr Bessent floated the need for a probe when pressed on whether he would dissuade President Trump from taking a decision to remove Federal Reserve chairman Jerome Powell.
Mr Bessent questioned whether the central bank was fulfilling its objectives and said “what we need to do is examine the entire Federal Reserve institution”.
“The Fed, as well, deals with monetary policy, regulations, financial stability,” he said. “And again, I think that we should think: Has the organisation succeeded in its mission? You know, if this were the FAA and we were having this many mistakes, we would go back and look at, ‘why has this happened?’.
“There was fearmongering over tariffs and thus far we have seen very little if any inflation. We have had great inflation numbers, so I think this idea of them not being able to break out of a certain mindset – you know, all these PhDs over there, I don’t know what they do.”
Former Reserve Bank of Australia board member Warwick McKibbin warned against any review of the US Fed and noted it had been “successful in preventing another inflation outbreak this time”.
“I think it’s a big risk to do a review of the Fed at this point,” he said.
Professor McKibbin warned that the US fiscal position was also “completely unsustainable” and leading to a crisis point, noting that Mr Bessent himself had identified the economic challenge of high interest rates coupled with growing debt.
He sounded the alarm on the Big Beautiful Bill potentially racking up a budget deficit of 8 per cent of GDP, arguing that the only way to solve it was to “raise taxes, cut spending or inflate away the debt”.
Professor McKibbin said the latter option was “exactly what some advocates of breaking the independence of the Fed are advocating”.
Speaking on CNBC, Mr Bessent said Mr Powell’s term ended in May 2026, and noted that an extra spot on the Federal Reserve board would also open up in January, creating ample opportunity for the Trump administration to appoint a new governor more aligned to the administration’s views who could then be elevated as Fed chair.
Mr Bessent did not deny a report in The Wall Street Journal saying that he had privately counselled the US President not to fire Mr Powell.
“I’m not sure who the leaker was,” Mr Bessent said. “But the problem with leakers is they only have partial information.
“President Trump solicits a whole range of opinions and makes a decision. So he takes a lot of input. And, at the end of the day, it’s his decision. Just as it was his decision on Iran.”
The Federal Reserve last cut its key benchmark interest rate in December, reducing it by 0.25 percentage points to a target range of 4.25-4.5 per cent. In June, the US Bureau of Labour Statistics reported that inflation over the past 12 months was running at 2.7 per cent.
After the Federal Open Market Committee held rates steady in June, Mr Powell said near-term measures of inflation expectations had moved up in recent months and identified US tariffs as the “driving factor”.
He warned that increases in tariffs were “likely to push up prices and weigh on economic activity”.
Dubbing Mr Powell “Too Late” for failing to loosen monetary policy, Mr Trump has called on the Fed to embrace a policy rate much closer to 1 per cent in order to lower government borrowing costs to finance deficits from his spending and tax-cut plans.
Posting earlier this month on his Truth Social platform, Mr Trump said the “Fed Rate is AT LEAST 3 Points too high. ‘Too Late’ is costing the US 360 Billion Dollars a Point, PER YEAR, in refinancing costs. No Inflation, COMPANIES POURING INTO AMERICA. LOWER THE RATE!!!”
Speaking in the Oval Office last week, Mr Trump confirmed he had asked a group of House Republicans if he should fire Mr Powell – but made clear that he was not yet prepared to take that step.
“I talked to them about the concept of firing him. I said, ‘What do you think?’. Almost all of them said I should. But I’m more conservative than they are,” the President said.
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