Bessent Says Next Fed Chair Must Look Beyond Rates

U.S. Treasury Secretary Scott Bessent says the next leader of the Federal Reserve should be someone capable of taking a broad view of the institution beyond just interest rate adjustments, cautioning that the central bank’s growing range of duties could threaten its autonomy.

Speaking in Washington on August 7, Bessent described the qualities he believes the position demands. “It’s someone who has to have the confidence of the markets, the ability to analyze complex economic data,” he told the Japan’s Nikkei. He added that the next chair should be focused on future trends rather than relying too heavily on historical patterns.

According to Reuters, Bessent is leading efforts to choose a successor to current Fed Chair Jerome Powell, whose term expires in May. The candidate list now includes an experienced economic adviser and a onetime head of a regional Federal Reserve Bank.

When asked about President Donald Trump’s repeated public calls for lower interest rates, Bessent said the president makes his position known, but stressed that “at the end of the day, the Fed is independent.”

Bessent outlines broader meaning of “strong dollar” policy

Regarding currency strategy, Bessent explained that his administration’s concept of a “strong dollar” isn’t linked to a specific number shown on markets, but to the dollar’s comparative position against other currencies. “The strong dollar policy is to have policies that continue to keep the U.S. dollar the reserve currency,” he said. “And if we have good economic policies, then the dollar will naturally be strong.”

Bessent has previously held talks on exchange rates with Japan’s Finance Minister Katsunobu Kato. In May, during a G7 meeting, they concluded the dollar-yen exchange rate at that moment aligned with underlying fundamentals. In June, the Treasury Department informed Congress that the Bank of Japan should maintain its course of policy tightening, which it argued would help “normalize” the yen’s weakness.

Bessent said he believes that as long as the BOJ focuses on fundamentals such as inflation and growth, exchange rates will adjust on their own. He said Governor Kazuo Ueda and the BOJ board are aiming for an inflation target rather than a currency level.

The BOJ last year wrapped up a decade of large-scale stimulus and raised short-term interest rates to 0.5% in January, concluding that Japan was close to sustainably reaching its 2% inflation goal. Since then, policymakers have been cautious about further hikes.

Analysts point to this gradual pace as one factor behind the yen’s weak performance against major currencies. While inflation has stayed above the 2% target for more than three years, Ueda has urged careful review of how U.S. tariffs might affect Japan’s fragile economy.

List of potential Powell successors grows

There are now about 10 possible replacements for Powell. Among them are former St. Louis Fed President James Bullard, now dean of Purdue University’s business school, and Marc Sumerlin, who served as an economic adviser to President George W. Bush. National Economic Council Director Kevin Hassett, former Fed Governor Kevin Warsh, and current Fed Governor Christopher Waller are also being considered.

Trump has made clear he wants a chair willing to cut rates. Hassett, Warsh, and Waller have all indicated openness to lowering borrowing costs. Bullard said in May he believed the Fed could reduce rates by September. Sumerlin’s recent stances on monetary policy are not publicly known.

The president moved quickly to fill another Fed Board position this week after Governor Adriana Kugler resigned. Stephen Miran from the Council of Economic Advisers will finish her term, which ends January 31. Trump is also continuing his search for a nominee to fill the upcoming 14-year term starting February 1.

Source: CryptoSlate