US Treasury Secretary Calls for ‘Internal Review’ of Federal Reserve

US Treasury Secretary Scott Bessent has called for the Federal Reserve to undertake an “exhaustive internal review” of its non-monetary policy operations, accusing the central bank of experiencing “significant mission creep.” Bessent made the call on Monday following comments he made earlier in the day during an interview with CNBC.

In his post on X (formerly known as Twitter), Bessent sought to clarify his earlier remarks, where he stated, “what we need to do is examine the entire Federal Reserve institution and whether they have been successful.”

This statement came in response to a question about whether Federal Reserve Chair Jerome Powell should be dismissed. President Donald Trump has consistently attacked Powell in recent weeks, criticising the Fed’s reluctance to lower interest rates.

The White House, however, has stated that Trump has no plans to dismiss Powell ahead of his term’s conclusion in May 2026. Such a move would be legally contentious and could raise concerns over the independence of the Federal Reserve.

Nevertheless, Trump and other Republican allies have recently shifted focus to the Fed’s $2.5 billion headquarters renovation project, which some see as a potential avenue for pushing Powell out of office.

Federal Reserve’s Mission Creep

In his X post, Bessent emphasised that the Federal Reserve’s independence is critical to ensuring continued economic growth and stability in the United States. However, he expressed concern that this autonomy is being undermined by “persistent mandate creep” into areas outside of the Fed’s core mission. Bessent did not specify which policy areas he was referring to, but he called for a review of the Fed’s over-budget renovation project, suggesting that it warranted closer scrutiny.

Federal Reserve’s Oversight Focus:

Bessent also clarified that he had “no knowledge or opinion on the legal basis” of the massive renovation project. His focus remained on the review of the Fed’s activities and its role in the economy, calling into question whether the central bank was overstepping its boundaries.

Trump’s Tactics and Bessent’s Private Discussion

Bessent did not comment directly on a report by The Wall Street Journal, which emerged over the weekend, suggesting that Bessent had privately discussed with President Trump why he should not attempt to fire Jerome Powell. According to the Journal, Bessent’s reasons for advising against such a move were centred on its potential negative impact on both the economy and financial markets, as well as the legal and political challenges Trump would face in attempting to dismiss Powell.

In his CNBC interview, Bessent addressed the broader implications of Trump’s economic policies, particularly the wide-reaching tariffs that the president has imposed since returning to office in January.

Impact of Trump’s Tariffs on Inflation

Bessent noted that, contrary to expectations, there has been “very little, if any, inflation” resulting from Trump’s broad tariffs thus far. This observation follows Trump’s imposition of a 10 percent tariff on goods from nearly all trading partners, with higher levies on steel, aluminium, and automobiles. Despite concerns over inflationary pressures, the effects on consumer prices have remained muted, mainly because Trump has either postponed or watered down some of his more aggressive tariff measures.

Economists, however, expect that more comprehensive data in the coming months will provide a clearer picture of the long-term impact of these tariffs on the US economy.

Trump’s Tariffs

As the debate continues over the direction of the Federal Reserve’s policies and the impact of Trump’s tariffs, Bessent’s call for an internal review of the Fed could signal a deeper examination of how the central bank’s policies interact with the broader economic strategies being pursued by the White House. With tensions rising over the central bank’s independence and the president’s economic approach, the coming months could prove pivotal in shaping the future of US monetary and fiscal policy.