Formal process to replace Fed Chair Powell underway: US Treasury Secy

US Treasury Secretary Scott Bessent says a formal process to find Jerome Powell's successor as Fed Chair has begun and suggests Powell should step down entirely after his term ends in May 2026

US Treasury Secretary Scott Bessent has said that Federal Reserve Chair Jerome Powell should consider leaving the central bank entirely once his term as chair ends in May 2026, and that the process to find his successor is already underway.

 

“Traditionally, the Fed chair also steps down as a governor,” Bessent told Bloomberg Television on Tuesday. “There’s been a lot of talk of a shadow Fed chair causing confusion in advance of his or her nomination. And I can tell you, I think it’d be very confusing for the market for a former Fed chair to stay on also.”

 

 

Given Powell’s term as a governor of the Fed continues until January 2028, he could technically remain at the bank and continue influencing monetary policy decisions. However, he has avoided confirming whether he intends to stay on. This uncertainty has added complexity to the task ahead for US President Donald Trump and his advisers, who are preparing for a leadership change at the central bank next year.

Market reaction, upcoming vacancy

Bessent’s remarks appeared to unsettle financial markets. Yields on two-year US Treasury notes climbed, hitting a session high of 3.92 per cent after the interview aired.

 

Unless Powell announces he will vacate his board seat, Trump will have only one planned vacancy to fill in 2026. That would come when Adriana Kugler’s term on the Federal Reserve’s Board of Governors ends in January. Bessent mentioned last month that a potential timeline could see a new Fed chair nominee announced by October or November, ahead of Kugler’s term ending.

Search for a new Fed Chair underway

“There’s a formal process that’s already starting” to identify the next chair, Bessent said. “There are a lot of good candidates inside and outside the Federal Reserve.”

 

Asked whether Trump had approached him personally to take on the role, the Treasury Secretary responded: “I am part of the decision-making process.” He added: “It’s President Trump’s decision, and it will move at his speed.”

Trump seeks rate-cut friendly successor

President Trump has signalled that he wants Powell’s replacement to support cutting interest rates. Since returning to office, he has repeatedly criticised Powell for maintaining higher rates, after previously pushing for cuts during his earlier presidency.

 

While Trump pushes for looser monetary policy, Federal Reserve officials have been more cautious. They’ve warned that Trump’s tariff hikes could fuel inflation and prefer to wait for clearer economic signals before resuming any rate cuts.

Bessent on inflation forecast

The latest consumer inflation report — the June Consumer Price Index — is due on Tuesday morning. Bessent said he had not seen the data ahead of his Bloomberg interview but urged against reading too much into a single figure.

 

“I wouldn’t put too much emphasis on one number,” he said, referring to the CPI data. He also noted that recent inflation trends suggest that concerns about a significant rise in prices may not be justified.

 

“They’ve had some big forecasting errors,” Bessent said of the Fed’s past projections. “And this may be one” as well, he added. Still, he pointed out that Trump has made his stance clear: “Numerous times he is not going to fire Jay Powell.”