United States President Donald Trump has ruled out Secretary of the Treasury Scott Bessent as his pick to replace Federal Reserve Chair Jerome Powell. Trump, who has repeatedly criticised Powell for not moving faster to lower interest rates, said on Tuesday that Bessent wished to continue in his current role. “I love Scott, but he wants to stay where he is,” Trump said in an interview with CNBC, adding that Bessent was doing a “great job” and had told him as recently as Monday that he did not want the position.
Trump said he had four candidates in mind to replace Powell, whose term expires in May, including Kevin Warsh, who formerly served on the Fed’s seven-member board of governors, and Kevin Hassett, the director of the White House National Economic Council. He said he could use the opportunity to replace Adriana D Kugler, who last week announced her early resignation as one of the seven governors, to put his pick for chair on the board in advance of Powell’s departure. “I’m going to make the decision soon,” Trump said.
Trump’s repeated attacks on Powell, whom he has mockingly dubbed “too late”, have stoked concern about the US central bank maintaining its independence, which investors view as crucial to the health of the US economy. Following reports last month that Trump had asked Republican lawmakers whether he should fire the Fed chair, the benchmark S&P 500 tumbled 0.7 percent. US stocks swiftly recovered after Trump denied that he had any intention to remove Powell early.
Under legislation and US Supreme Court precedent, the president may only remove the Fed chair “for cause”, widely interpreted to mean proof of corruption or malfeasance. Trump’s comments have raised questions about the potential impact on the Fed’s independence and the US economy.
Trump’s decision to rule out Scott Bessent for the Fed Chair position has significant implications for the US economy. With Bessent’s departure from consideration, Trump is likely to appoint a new chair who shares his views on interest rates and economic policy. This could lead to a shift in monetary policy, potentially impacting inflation, employment, and overall economic stability.
The potential candidates for the Fed Chair position, including Kevin Warsh and Kevin Hassett, have expressed views on interest rates that align with Trump’s economic agenda. Warsh, a former Fed governor, has advocated for lower interest rates to stimulate economic growth. Hassett, Trump’s former economic adviser, has also supported lower rates, citing their potential to boost economic activity. Their appointments could shape the Fed’s policy decisions and impact the US economy.
Critics have raised concerns that Trump’s repeated attacks on the Fed and his advocacy for lower interest rates could undermine the central bank’s independence. The Fed has long operated independently, making decisions based on economic data rather than political pressure. Trump’s potential appointment of a Fed Chair who shares his views on interest rates could alter this dynamic, potentially impacting the Fed’s ability to make data-driven decisions.
The uncertainty surrounding the Fed’s future direction has led to market volatility. Investors are closely watching Trump’s decisions on key economic positions, including the Fed Chair and the Bureau of Labor Statistics Commissioner. The potential appointment of a new Fed Chair who supports lower interest rates could lead to increased market activity, but it also raises concerns about inflation and economic stability. As a result, market participants are eagerly awaiting further developments on the Fed Chair appointment.