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Tuesday, Jul 22, 2025
Outside the box.
US Treasury Secretary Calls for Institutional Review of Federal Reserve Amid AI‑Driven Growth Expectations
Scott Bessent urges examination of Fed’s effectiveness and autonomy as AI boom looms and rate‑cut pressure grows
U.S. Treasury Secretary Scott Bessent has urged a comprehensive review of the Federal Reserve “as an institution,” raising questions about its performance and independence even as artificial‑intelligence‑driven productivity gains could shape economic policy in 2026.
Bessent made the remarks during a televised interview on July 21, asserting that officials should assess “whether the organisation succeeded in its mission.” He likened potential failures at the Fed to those at the Federal Aviation Administration, suggesting a formal review would be warranted if comparable missteps had occurred .
He also criticised the Fed’s commentary on tariffs, accusing it of “fear‑mongering” despite recent low inflation readings, and asserted that lasting inflationary effects from trade tensions have so far been minimal .
Bessent extended his critique to the Fed’s non‑monetary activities, calling for an exhaustive review of such operations.
He warned that “persistent mandate creep into areas beyond its core mission” could jeopardise the central bank’s independence, and questioned the timing of the Fed’s $2.5 billion headquarters renovation amid reported operating losses .
The timing of Bessent’s remarks coincides with heightened political pressure over interest‑rate policy.
The Fed has kept rates steady since December 2024, prompting criticism from President Trump and his administration, who seek reductions to offset rising government borrowing costs.
Trump publicly queried whether Fed Chair Jerome Powell should be removed, although he later acknowledged no immediate intention to dismiss him .
Speaking at a recent technology conference in Sun Valley, Idaho, Bessent conveyed that leaders in the U.S. tech sector anticipate a faster‑than‑expected artificial‑intelligence revolution, potentially beginning in the first half of 2026.
They project that AI‑driven productivity could boost economic expansion without triggering renewed inflation .
In response to this scenario, Bessent stated that if inflation remains low, a rate cut by the Fed would be appropriate.
He questioned the potential need for the central bank to adjust policy “if inflation data are low” .
Fed Chair Powell’s term runs through May 2026, and Bessent noted that additional vacancies on the Federal Reserve Board are forthcoming.
He said discussions about the next Fed Chair could begin in the autumn, highlighting the administration’s continued scrutiny of monetary policy leadership .
Bessent’s remarks add to a backdrop of criticism leveled by the Trump administration over the Fed’s policy decisions and fiscal oversight — encompassing both its interest‑rate stance and capital projects.
While the Federal Reserve maintains it operates independently, these developments reflect growing tensions at the intersection of economic policy, technological disruption, and central bank governance.
Bessent made the remarks during a televised interview on July 21, asserting that officials should assess “whether the organisation succeeded in its mission.” He likened potential failures at the Fed to those at the Federal Aviation Administration, suggesting a formal review would be warranted if comparable missteps had occurred .
He also criticised the Fed’s commentary on tariffs, accusing it of “fear‑mongering” despite recent low inflation readings, and asserted that lasting inflationary effects from trade tensions have so far been minimal .
Bessent extended his critique to the Fed’s non‑monetary activities, calling for an exhaustive review of such operations.
He warned that “persistent mandate creep into areas beyond its core mission” could jeopardise the central bank’s independence, and questioned the timing of the Fed’s $2.5 billion headquarters renovation amid reported operating losses .
The timing of Bessent’s remarks coincides with heightened political pressure over interest‑rate policy.
The Fed has kept rates steady since December 2024, prompting criticism from President Trump and his administration, who seek reductions to offset rising government borrowing costs.
Trump publicly queried whether Fed Chair Jerome Powell should be removed, although he later acknowledged no immediate intention to dismiss him .
Speaking at a recent technology conference in Sun Valley, Idaho, Bessent conveyed that leaders in the U.S. tech sector anticipate a faster‑than‑expected artificial‑intelligence revolution, potentially beginning in the first half of 2026.
They project that AI‑driven productivity could boost economic expansion without triggering renewed inflation .
In response to this scenario, Bessent stated that if inflation remains low, a rate cut by the Fed would be appropriate.
He questioned the potential need for the central bank to adjust policy “if inflation data are low” .
Fed Chair Powell’s term runs through May 2026, and Bessent noted that additional vacancies on the Federal Reserve Board are forthcoming.
He said discussions about the next Fed Chair could begin in the autumn, highlighting the administration’s continued scrutiny of monetary policy leadership .
Bessent’s remarks add to a backdrop of criticism leveled by the Trump administration over the Fed’s policy decisions and fiscal oversight — encompassing both its interest‑rate stance and capital projects.
While the Federal Reserve maintains it operates independently, these developments reflect growing tensions at the intersection of economic policy, technological disruption, and central bank governance.
