The end of the Jerome Powell era? The White House is preparing changes: We need to simplify things

US Finance Minister Scott Bessent said in an interview with CNBC on Tuesday that it was time for the Fed, the US central bank, to “step into the background.” He announced that Donald Trump may appoint a new leader before Christmas and emphasized that this is the president's prerogative.

Bessent, who is overseeing the search for a successor to current Federal Reserve Chairman Jerome Powell, did not want to speculate on who the administration's favorite is in this race.

CNBC reports that the short list of candidates for the head of the central bank is widely believed to include: White House economic adviser Kevin Hassett, current Fed governors Christopher Waller and Michelle Bowman, former Fed official Kevin Warsh and one of the managers of BlackRock, a giant investment fund, Rick Rieder.

The Finance Minister said he assumed the Fed would now play a less important role than before and would no longer have the dominant position it has had since the financial crisis.

“I think we need to simplify things. … It's time for the Fed to step aside as it used to be, calm things down and work for the American people,” he added.

The Federal Reserve (Fed) is considered one of the most important financial institutions in the world, as economist and Nobel Prize winner Paul Krugman wrote on his blog. The Fed's power must be protected from the abuses of politicians, especially those like Donald Trump, he added.

The US president has been threatening for a long time to fire – contrary to regulations and tradition – the head of the Fed, Jerome Powell, whom he repeatedly insulted and threatened, calling him a “moron” and a “big loser”.

Trump demanded lower interest rates to stimulate the economy. Lowering interest rates is a stimulus for economic development, but carries the risk of increased inflation. As the French weekly “L'Express” explains: “however, such an increase is illusory, it is a kind of artificial beautification of the situation” which leads to price increases.

The U.S. central bank sets monetary policy by influencing short-term interest rates and overall financial conditions to pursue its twin missions – to protect the economy from inflation and to ensure the fullest possible employment – we read on the Federal Reserve's website. Steps taken by the Fed often influence the decisions of other central banks and also have an immediate impact on capital markets. (PAP)

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