Treasury Secretary Scott Bessent on Monday suggested a review of the Federal Reserve that would go beyond the current controversy over building renovations and look at its overall function.
“What we need to do is examine the entire Federal Reserve institution and whether they have been successful,” Bessent said during an interview on CNBC’s “Squawk Box.” “Has the organization succeeded in its mission? If this were the [Federal Aviation Administration] and we were having this many mistakes, we would go back and look at why has this happened.”
The comments come amid an intensifying conflict between the White House and the central bank. It was not clear what form a review would take or who would perform it.
Last week saw conflicting reports over whether President Donald Trump was preparing to fire Fed Chair Jerome Powell. Reports from the White House indicated a move was forthcoming, but Trump soon after denied he is readying what would be a legally questionable maneuver.
Bessent has been at the center of the controversy, both as a potential successor at the Fed as well as reports pointing to the Treasury chief as a mediator looking to discourage Trump from ousting Powell.
“President Trump solicits a whole range of opinions and then makes a decision,” Bessent said when asked about a Wall Street Journal report that he had helped convince Trump to stay his hand on Powell. “So he takes a lot of inputs, and at the end of the day it’s his decision.”
Trump has demanded the Fed dramatically lower its benchmark overnight borrowing rate, something that appears unlikely regardless of the chair.
In addition, the administration in recent days has criticized the Fed for cost overruns at the $2.5 billion renovation it has undertaken for two of its buildings in Washington.
Administration officials reportedly are planning soon to view the project in person.
In a related development, Rep. Anna Paulina Luna on Saturday requested the Justice Department investigate Powell at a criminal level for what the Florida Republican charged was lying to Congress. Powell described changes to the product during congressional hearings in February in a way that administration officials have alleged was misleading. CNBC has reached out to the Fed for comment.
On the question of interest rates, Bessent backed the idea that the Fed probably should be easing with inflation mostly moderating.
“They were fear mongering over tariffs, and thus far we have seen very little, if any, inflation,” Bessent said. “We’ve had great inflation numbers. So, you know, I think this idea [is] of them not being able to break out of a certain mindset. All these Ph.D.s over there, I don’t know what they do.”
The Fed last cut rates in December, which completed a brief easing cycle that brought the fed funds rate down a full percentage point. However, as the Fed eased both mortgage rates and Treasury yields moved higher.
Market pricing indicates the Fed probably will cut again in September.
