Fed Independence in Focus: Bessent Attacks Powell Ahead of Chair Nomination

The transition of power at the Federal Reserve is turning increasingly volatile. On Tuesday, US Treasury Secretary Scott Bessent launched a stinging public critique of incumbent Fed Chair Jerome Powell, accusing him of poor judgment and mismanagement.

The “Checkmate” Strategy?

In a CNBC interview, Bessent criticized Powell‘s decision to attend legal hearings regarding the dismissal of Fed Governor Lisa Cook, suggesting Powell was attempting to “put his thumb on the scale” of judicial proceedings. Bessent further attacked the Fed’s balance sheet management, citing massive losses from pandemic-era asset purchases.

This coordinated pressure campaign comes just days before the White House is expected to name the next Federal Reserve Chair. Bessent confirmed the announcement could come as early as next week, with four candidates currently vetted.

Market Implications

The politicization of the Fed adds a layer of risk premium to the US Dollar.

• Institutional Trust: Investors fear that the incoming Chair may face pressure to align monetary policy with the administration's growth targets rather than the dual mandate of price stability and employment.
• USD Reaction: The Dollar Index showed vulnerability, dipping below 98.00 earlier in the session, as markets digested the potential for a more pliable central bank leadership.

If the administration succeeds in forcing Powell out before his term officially expires in May, or undermines the legal protections of Fed Governors, the perceived independence of the world's most important central bank could be severely damaged, potentially weighing on long-term demand for US assets.