Scott Bessent, the U.S. Treasury Secretary and key architect of President Trump’s economic agenda, is being discussed as a potential successor to Federal Reserve Chair Jerome Powell. Bloomberg cited anonymous sources saying his name has been floated for the role.
The White House has denied the report that claimed Bessent is under consideration. But during a congressional hearing on Wednesday the Treasury chief did little to quell the rumors. Asked whether he would prefer to lead the Fed or stay at Treasury, Bessent said he had “the best job” in Washington and wanted to remain in his current role through 2029, “but I’m happy to do what President Trump wants me to do,” he added.
No formal search process has started. Powell’s term expires in May 2026, though he will remain a Fed governor until February 2028. Trump has said that a decision on his successor would be made “very soon.” In addition to Bessent, former Fed governor Kevin Warsh has reportedly been floated as a candidate.
While Bessent has no central banking experience, he holds significant influence over the administration’s trade, tax and regulatory policy, and was instrumental in securing last week’s preliminary détente with China.
Threat to Fed independence
According to Francesco Pesole, FX-strategist at ING, the dollar “strongly dislikes” any threats to Fed independence. “Add in that Bessent is likely to favour much lower rates (echoing Trump’s rhetoric), and the greenback faces mostly downside risks from this story,” he wrote in a note to clients.
Markets tend to reward central bank independence and policy predictability, two factors seen as at risk if Trump installs a loyalist at the Fed. Lower expected interest rates would reduce the appeal of U.S. assets, putting pressure on the dollar, especially against currencies backed by more hawkish central banks.
Others expect little panic by market participants.
Either Bessent or Warsh “would be given the benefit of the doubt from the financial community” to preserve the Fed’s autonomy, said Tim Adams, president and CEO of the Institute of International Finance, a thinktank in Washington D.C. However, the historical precedent set by the Banking Act of 1935, which separated the Treasury from the Fed, underscores the gravity of any move that could blur these lines, he told Bloomberg earlier this week.
Different profile
Before joining Trump’s cabinet, Bessent was a macro hedge fund manager and chief investment officer at Soros Fund Management. Since taking over at Treasury earlier this year, he has led the administration’s more aggressive stance on tariffs, overseen controversial tax proposals including Section 899, and become the public face of the U.S. “Liberation Day” policy on trade.
This week, he returned from London after helping to broker the outlines of a new U.S.-China trade agreement. Pressed about the specifics of the deal, Bessent said the terms were “still under construction” and that the process would take time.
He also told reporters that the temporary suspension of “Liberation Day” tariffs for U.S. allies, which are set to expire in early July is “highly likely”. Lawmakers demanded more clarity on what future trade talks would yield, but Bessent offered few details. The tariffs will only be delayed, he said, for countries involved in good-faith trade talks with the United States.
Trump calls for lower rates
Trump has made no secret of his desire for looser monetary policy. On Wednesday, shortly after the release of the May consumer price index, he posted on Truth Social: “CPI JUST OUT. GREAT NUMBERS! FED SHOULD LOWER ONE FULL POINT. WOULD PAY MUCH LESS INTEREST ON DEBT COMING DUE. SO IMPORTANT!!!”
The post came hours after data showed inflationary pressures easing slightly. Core CPI rose 2.8 percent year over year in May, unchanged from April, while monthly core inflation slowed to 0.1 percent. The cooler-than-expected reading initially calmed markets, but analysts cautioned against overreaction.
“A lot of people were expecting higher costs from the tariffs to start showing up already,” said Claudia Sahm, founder of Sahm Consulting, in an interview with Yahoo Finance. “This report doesn’t necessarily tell us where we are headed by the end of the year. I don’t think we have a picture yet of what the costs are from the current trade policy.”
Despite the benign print, most Fed officials are expected to keep rates on hold for now. They are looking for greater clarity on the inflationary impact of Trump’s tariff regime before making any policy moves.