In the latest Trump Vs. Powell saga, U.S. Treasury Secretary Scott Bessent has come up with a piece of advice for the United States president on his plan to remove the Federal Reserve Chair. According to news circulating on Wall Street, Bessent laid out his case as to why he believes Donald Trump shouldn’t oust Fed Chair Jerome Powell just yet.
He privately advised Donald Trump against removing Fed Chair Jerome Powell, citing strong economic performance, the likelihood of Fed rate cuts later this year, and potential legal and political risks. Bessent reasons that Powell’s term ends 10 months from now, and should allow for a natural transition. Trump has been adamant about firing Jerome Powell, but will he heed the advice of his Treasury Secretary?
Scott Bessent Warns Market Turbulence Amid Powell’s Ouster
Bessent, in a private meeting with Trump, urged him not to dismiss Jerome Powell, given that his tenure ends in May. The Treasury Secretary notes that Powell’s term ends in May, and Trump should allow for a natural transition. Although Trump described Bessent as “reassuring,” market watchers believe Powell’s dismissal is around the corner.
Trump has been frustrated with Powell’s rate policy, calling it unwarranted given the strong U.S. economy. He once blamed Powell for costing the country a fortune by not lowering rates in a post he made on his Truth Social platform in June. The United States President once called the Fed Chair a fool publicly, and has always hinted at firing him if he doesn’t slash interest rates.
Bessent argues that replacing Powell now could destabilize the economy and undermine the Federal Reserve’s sovereignty. What’s the use of firing him if he only had 10 months left in office?
Market Turbulence, Lawsuits, Among the Consequences of Removing Fed Chair
Ousting Powell may have some serious consequences. Reports of his ouster once triggered market jitters, with equities and bond yields dipping. This confirms Bessent’s arguments, as the market can be sensitive to threats like this.
Bessent also notes that the Fed is already planning two rate cuts by the end of 2025. He argues that removing Powell mid-way might send mixed signals and affect policy continuity. Furthermore, it could lead to a rise in the economic crisis, which may take time to resolve if the fire still burns.
Besides, removing Powell might lead to a series of lawsuits, as the Federal Law prevents a Fed Chair from being ousted except for a genuine reason. In this case, Trump has no reason to fire Powell, so a premature ouster could trigger several legal disputes.
Bessent Suggests an Alternative
Bessent floated the idea that instead of firing Powell, Trump should nominate a successor pending the end of Powell’s tenure. Managing the situation this way preserves market confidence while the country awaits the beginning of a new tenure.
However, Bessent hints at a formal selection process. He joins other economic experts, such as Jamie Dimon, who warn that politicizing the Fed Chair seat will undermine autonomy, confidence, and send the wrong message to political rivals and even international leaders.
The Fed is expected to cut interest rates by year-end if leadership isn’t abruptly changed. Currently, the public feels Trump will likely nominate Kevin Hassett. A well-planned succession will stabilize the market, so Trump shouldn’t act rashly.
