US Treasury’s Bessent calls for review of Fed non-monetary policy operations

US Treasury Secretary Scott Bessent said the Federal Reserve’s vital independence on monetary policy is threatened by its “mandate creep” into non-policy areas and he called on the US central bank to conduct an exhaustive review of those operations.

The Fed’s autonomy “is threatened by persistent mandate creep into areas beyond its core mission, provoking justifiable criticism that unnecessarily casts a cloud over the Fed’s valuable independence on monetary policy,” Bessent said in a post on X.

He called Fed monetary policy “a jewel box” that should be walled off to preserve its independence, which he called a cornerstone of continued US economic growth and stability.

Bessent said a review should be conducted into the Fed’s decision to launch a massive renovation project of its headquarters at a time when it is posting operating losses. He did not say who should conduct that review, adding that he has “no knowledge or opinion on the legal basis” for the project.

President Donald Trump has railed repeatedly against Fed Chair Jerome Powell and urged him to resign because of the central bank’s reluctance to cut interest rates.

In recent days Trump has also taken aim at the US$2.5 billion renovation at the Fed’s almost 100-year-old Washington headquarters, which has exceeded its budget, suggesting there could be fraud involved and that might be a reason to oust Powell.

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A recent Supreme Court opinion has solidified a long-standing interpretation of the law that the Fed chair cannot be fired over policy differences but only “for cause.”

The Fed’s Board of Governors approved the renovation project in 2017, during Trump’s first term, and received design approval from the National Capital Planning Commission in 2020 and 2021.

Speaking with CNBC earlier on Monday, Bessent declined to comment on a report that he had advised Trump not to fire Powell, saying it would be the president’s decision.

“If this were the (Federal Aviation Administration) and we were having this many mistakes, we would go back and look at why. Why has this happened?” said Bessent, whom Trump has mentioned as a possible candidate to replace Powell. “All these PhDs over there, I don’t know what they do.”

Powell last week responded to a Trump administration official’s demands for information about cost overruns on the renovation project, saying it was large in scope and involved a number of safety upgrades and hazardous materials removals.

Bessent declined to be drawn on predictions that US financial markets could crash if Powell was ousted.

Powell’s term as chair ends in May 2026, although he is due to stay on as a Fed governor through January 2028. Bessent noted another governor seat will come open in January. REUTERS