U.S. Treasury Secretary Basant: The Fed chair nominee may be announced before Christmas, and the Fed should return to a behind-the-scenes role.

Written by: Li Jia

Source: Wall Street Watch

U.S. Treasury Secretary Becerra stated on November 25 that President Trump may announce the new Federal Reserve Chair nominee before Christmas, providing the market with a relatively clear policy timeline.

On Tuesday local time, according to media reports, Bessent, who is responsible for finding Powell's successor, revealed in an interview that he still has one interview to complete and will not make any guesses about who will take over as the Federal Reserve Chair. Bessent said:

“I believe the president is very likely to announce news before Christmas. But it completely depends on his authority, whether it will be before the Christmas holiday or after the New Year. However, I think everything is progressing smoothly.”

Bessenet also proposed reforms to the functions of the Federal Reserve, arguing that the central bank should “return to the background” and simplify its complex toolbox of policy instruments. He specifically pointed out that the ample reserves system established by the Fed has shown cracks; although decision-makers have decided to stop the balance sheet reduction starting in December to maintain liquidity, the current system, including various tools like the standing repurchase facility, has become overly complex. He stated:

“I believe we must push for simplification of affairs. It's time for the Federal Reserve to step back, just like in the past, to let the situation stabilize and truly serve the American people.”

The finance minister also questioned the current communication mechanism of the Federal Reserve, implying that central bank officials speak too frequently. He emphasized that there is a complex interrelationship between monetary policy, the balance sheet, and regulatory policies, which is precisely the ability dimension they are focusing on during the selection process for a new chairman.

Previously, Trump continuously pressured the Federal Reserve to cut interest rates, even threatening to fire Powell, stating that he “really wanted” to fire him, and encouraged Bessent to “work hard to influence” the Fed chairman to lower the key interest rates. Trump even joked to Bessent, “If you don't solve the problem quickly, I'll fire you.” In response, Bessent stated:

“If you were in the room at that time, you would know he was definitely joking. Monetary policy has now become very complex, and it's not just as simple as lowering interest rates anymore.”

The current term of Federal Reserve Chairman Jerome Powell will expire in May 2026. There is currently a divergence within the Federal Reserve regarding the necessity of further interest rate cuts. According to a recent statement by New York Fed President John Williams, the market widely expects the FOMC to approve a third consecutive rate cut at its December meeting.

According to reports, the final list of candidates includes National Economic Council Director Kevin Hassett, former Governor Kevin Warsh, BlackRock executive Rick Rieder, as well as current Federal Reserve Governors Christopher Waller and Michelle Bowman.