U.S. Treasury Secretary Scott Bessent advised President Donald Trump not to dismiss Federal Reserve (Fed) Chair Jerome Powell, due to concerns about disrupting the markets and affecting politics.
According to close sources, Bessent emphasized that Powell will end his term in May 2026, and firing him at this time is unnecessary when the economy is stable and the markets are responding positively to Trump's policies.
Concerns About the Independence of the Fed
The news that Trump is considering firing Powell has temporarily shaken the financial markets, raising fears that political intervention in the Fed would undermine the agency's independence in controlling inflation.
Although Trump has complained that the Fed should lower interest rates sooner, he told the press that there are no plans to fire Powell, despite previously discussing this with Republican lawmakers.
Long-Term Influence Strategy Over the Fed
Bessent emphasized to Trump that if Powell is fired, the acting chair would be Fed Vice Chair Philip Jefferson, who is also a Biden appointee and close to Powell.
The approval of a new nominee is also unlikely to happen quickly due to the Senate's summer recess. Instead, Bessent pointed out a strategic opportunity:
"The president will have the authority to appoint two important positions at the Fed at the beginning of 2026 — Council member Adriana Kugler's term ends in January and Powell's in May. This is when he can shape the long-term direction of the Fed."