Powell Can Finish Remainder of Fed Term, Says Trump’s Treasury Nominee Scott Bessent

Federal Reserve Chair Jerome Powell can complete the remainder of his term, says Scott Bessent, a Wall Street billionaire financier and President-elect Donald Trump’s nominee to lead the Treasury Department.

“As the President said on Sunday, and I’m in complete agreement with him, that Jay Powell will serve out his term,” Bessent told CNBC on Dec. 10.

Bessent, poised to oversee the renewal of the Trump-era Tax Cuts and Jobs Act, held meetings with several members of the Senate Finance Committee this week, including Sen. Mike Crapo (R-Idaho).

Trump has been critical of Powell and the central bank’s decisions—both in his first term and during the 2024 election.

On the campaign trail, Trump accused Powell of playing politics by cutting interest rates ahead of the presidential election to help the Democrats.

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11/27/2024

“It looks to me like he’s trying to lower interest rates for the sake of maybe getting people elected, I don’t know,” Trump told Fox Business Network’s Maria Bartriomo in February. “I think he’s going to do something to probably help the Democrats, I think, if he lowers interest rates.”

After the Fed lowered the benchmark policy rate by 50 basis points for the first time since the onset of the COVID-19 pandemic, Trump suggested that it signals “the economy is very bad to cut it by that much, assuming they’re not playing politics.”

He also proposed allowing presidents to provide input on the Fed’s interest rate decision-making.

“I think that if you’re a very good president with good sense, you should be able to at least talk to [Powell],” Trump said at the Economic Club of Chicago in October. “I don’t say make the decision at all, but I mean I’ve been a very successful businessman.”

While the idea of terminating Powell has been floated, Bessent recently presented a different proposal.

In an Oct. 9 interview with Barron’s, Bessent suggested creating “a shadow Fed Chair.”

“And based on the concept of forward guidance, no one is really going to care what Jerome Powell has to say anymore,” he told the magazine.

“You could do one of two things: The current Fed chair could be reappointed, so you’ve created a path there,” the hedge fund investor said on Oct. 11. “Or the new Fed chair nominee would give forward guidance beyond the current Fed chair’s sell-by date.”

A Contentious Relationship

Powell was chosen by Trump in 2017 to head the central bank. Trump repeatedly criticized Powell and the Fed on social media as the central bank tightened monetary policy before lowering rates three times at the end of 2019.

“In fact, he actually dropped them too much … because I said I was threatening to terminate him,” Trump said at the Economic Club of Chicago.

President Joe Biden renominated Powell for a second four-year term as inflation rocketed to a 40-year high, prompting the Fed to raise interest rates to their highest levels in two decades.

Last month, Powell told reporters at the post-meeting press conference that he would not resign and that firing him is “not permitted under the law.”

“I’m not concerned that there’s some risk that we would lose our statutory independence,” he said. “There’s very, very broad support for that set of ideas in Congress, in both political parties, on both sides of the Hill.”

Looking ahead to 2026, former Federal Reserve Gov. Kevin Warsh has been viewed as Powell’s possible successor. Prior to Trump’s naming of Bessent, Warsh was at or near the top of the betting markets to be Trump’s Treasury choice, according to the betting website Polymarket.

Warsh, too, has criticized Powell’s leadership.

Earlier this year, he told CNBC that the Fed was “goosing the economy” at a time of full employment, causing asset prices to “melt up.”

He also stated that the Fed does not have “a serious theory of inflation.”

“I think in a world … where fiscal policy is irresponsible, the central bank needs to be very clear about its reaction function,” Warsh said in an interview with CNBC’s “Squawk Box” in October. “Be clear about its goals and not look like it’s lurching. That’s what put us in the mess we have.”

Powell has been pleased with his colleagues’ progress in restoring price stability and returning inflation to the Fed’s 2 percent inflation objective.

Financial markets will pay close attention to next week’s policy meeting.

While investors overwhelmingly expect the Fed to follow through on another quarter-point rate cut, they will monitor what the central bank will signal for the year ahead in the updated Summary of Economic Projections and Powell’s press conference.

“We’re not quite there on inflation, but we’re making progress,” Powell said last week. “We can afford to be a little more cautious.”

Officials have indicated that the central bank should start discussing the next policy path, whether slowing the pace of rate cuts or holding steady to assess economic conditions.

“The Fed will likely stay on course to slowly and methodically cut rates as the more sticky components of inflation are stabilizing,” Jeffrey Roach, chief economist for LPL Financial, said in a note emailed to The Epoch Times.

The Fed will next meet on Dec. 17–18.