Interviewed by CNBC Monday (July 21), Scott Bessent declined to comment on reports that he had advised President Donald Trump not to fire Federal Reserve Chairman Jerome Powell, saying it would be the president’s decision.
However, he added that the central bank needed a review, arguing it had engaged in “fear-mongering over tariffs.”
“I think that what we need to do is examine the entire Federal Reserve institution and whether they have been successful,” Bessent said.
“If this were the (Federal Aviation Administration) and we were having this many mistakes, we would go back and look at why. Why has this happened?” he said. “All these PhDs over there, I don’t know what they do.”
The report noted that Trump has called on Powell to step down due to the Fed’s hesitancy to lower interest rates. The president has also targeted a $2.5 billion renovation at the Fed’s Washington headquarters that has gone over budget, indicating there could be fraud involved and it might be a reason to fire Powell.
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Powell has said the project was a large one, encompassing several safety upgrades and hazardous materials removals, hence the larger budget.
According to the report, Bessent declined comment on predictions that U.S. financial markets could plunge if Powell was removed from his job. The chairman’s term ends in May of next year, though he will stay on as a Fed governor through January of 2028, the report added.
Testifying before the House Financial Services Committee last month, Powell said that increased tariffs were likely to “weigh on economic activity” and push up prices.
“The effects on inflation could be short-lived, reflecting a one-time shift in the price level. It is also possible that the inflationary effects could instead be more persistent,” Powell said. “For the time being, we are well positioned to wait to learn more about the likely course of the economy before considering any adjustments to our policy stance.”
Meanwhile, consumers remain concerned about the quickening pace of inflation, as PYMNTS wrote last week. While consumer sentiment crept up in July, it remains below historical averages, according to preliminary results from the University of Michigan’s Surveys of Consumers.
“Consumers are unlikely to regain their confidence in the economy unless they feel assured that inflation is unlikely to worsen, for example if trade policy stabilizes for the foreseeable future,” Surveys of Consumers Director Joanne Hsu wrote in the report.
