Treasury Secretary Scott Bescent signaled that Federal Reserve Chair Jerome Powell should fully depart the central bank when his term expires in May 2026, including relinquishing his position on the Board of Governors. "Traditionally, departing Fed chairs also exit the board," Bescent emphasized, adding that maintaining a "shadow chair" would breed market confusion. "Markets would be profoundly unsettled if a former chair remained," he reiterated during his remarks.
Bescent confirmed the initiation of formal proceedings to identify Powell's successor, noting multiple qualified candidates exist both within and outside the Federal Reserve system. When questioned about his own potential nomination, Bescent stated, "I'm part of the decision-making process," while stressing that "the ultimate choice rests with President Trump and will follow his timeline."
Powell's separate term as Fed governor extends to January 2028, allowing him to potentially remain involved in monetary policy decisions after stepping down as chair. His persistent refusal to clarify his intentions complicates the Trump administration's planning for the central bank's leadership transition. Treasury yields climbed following Bescent's comments, with two-year notes reaching 3.93% intraday while the dollar pared losses.
Unless Powell explicitly resigns his governorship, only one board vacancy will emerge next January with Adriana Kugler's departure. Bescent previously suggested unveiling the new chair as early as October or November this year. Trump has publicly advocated appointing a rate-cutting advocate to succeed Powell, having repeatedly criticized the Fed's current policy stance. Policymakers, however, express concerns that tariffs could fuel inflation and prefer gathering more economic data before considering rate reductions.
June economic indicators revealed core inflation undershooting expectations for a fifth consecutive month, as declining auto prices counterbalanced tariff-affected goods. While Bescent accused the Fed of "significant forecasting errors," he affirmed Trump's repeated assurances against dismissing Powell. Potential chair candidates include former Fed governor Kevin Warsh, National Economic Council Director Kevin Hassett, Bescent himself, and current governor Christopher Waller—a Trump appointee open to near-term rate cuts.