Trump Plans to Initiate Fed Leadership Change in Fall
U.S. Treasury Secretary Bessent stated in an interview with CNBC that the Trump administration plans to officially start the process this fall to find a successor for Federal Reserve Chairman Powell, revealing that "many good candidates" are under consideration. Although the specific list has not been disclosed, the news has already drawn significant market attention.
Since Powell was appointed as Fed Chairman during Trump's first term, there have been public criticisms due to monetary policy differences with Trump. Trump has repeatedly called for Powell’s resignation, but legally, the president cannot directly dismiss the Fed Chairman over policy disagreements, adding uncertainty to Powell's future.
Bessent noted that Trump has recently focused on advancing peace agreements, trade deals, and tax legislation, creating room for the Fed leadership change. He mentioned that the process will accelerate "after Labor Day," contributing additional variables to the U.S. political and financial landscape in the fall.
Tariffs Haven’t Triggered Inflation, Bessent Defends Policy Stance
In defense of Trump's high tariff policy, Bessent stated in the interview that "the tariffs have not yet caused inflationary pressure." He mentioned that although the market initially fell after April's announcement to impose tariffs on most trading partners, it quickly rebounded, indicating the market has adapted to the tariff policy.
Bessent emphasized that tariffs may cause short-term price increases but, in the long run, won't significantly raise overall inflation levels. He believes the upcoming tax legislation will stimulate private sector investment, strengthening U.S. economic resilience and offsetting the impact of tariffs, thereby continuing to drive stable economic growth.
Further Criticism of Federal Reserve's Interest Rate Policy
In the interview, Bessent criticized the current 4.25%-4.5% interest rate range, suggesting it represents a "very high real interest rate." According to past models, the Fed should have already cut rates, but due to strong employment markets and inflation exceeding targets, the Fed has delayed action.
He warned that if the Fed continues to delay rate cuts, it may have to undertake more significant rate reductions in September. "If they don't cut rates now, that's fine, but it could lead to a larger adjustment in the future," further reflecting the Trump administration's stance that the Fed should hasten rate cuts to boost the economy.
Speculation Arises Over Bessent Succeeding as Fed Chair
There is speculation over whether Bessent might become the next Federal Reserve Chairman. In response, Bessent said he is "very satisfied" with his current role as Treasury Secretary and did not directly address the possibility of taking over as Fed Chair. He noted that since the 1930s, a Treasury Secretary has not also served as Fed Chair, and the Federal Reserve Act requires Board members to serve full-time, legally precluding dual roles.
However, with Trump's recent appointment of Secretary of State Rubio as National Security Advisor breaking with convention, there is still imaginative space in the market for Bessent to potentially assume the Fed Chair position.
Tax Legislation and Economic Strategy Continue to Advance
Bessent emphasized that the tax legislation will further enhance U.S. competitiveness by stimulating private sector investment. The combination of tariff and tax policies will inject new momentum into the economy. The Trump administration believes that under the backdrop of advancing peace and trade agreements, the U.S. economy is poised for long-term stable growth, providing strong support for Fed policy adjustments.
