Bessent Sees No Reason Powell Should Step Down From Fed

Federal Reserve & Administration Conflict - The administration desires a lower interest rate policy and wants the Federal Reserve to cut interest rates by 200 to 300 basis points [2] - Concerns exist that the administration is applying political pressure on the Fed to lower interest rates, potentially using supervisory requirements and even headquarters renovations as leverage [3] - The market is questioning the Fed's independence from the administration, impacting perceptions of its autonomy [6][7] - A potential solution is for the White House to tone down its rhetoric regarding the Fed [8] Market Impact & Bond Market Reaction - Long-term bonds sold off when news initially suggested the president planned to fire Fed Chair Jerome Powell [6] - Prices for long-term bonds rebounded when the president indicated he was not planning to fire the Fed chairman [7] - The bond market is questioning the Fed's resilience to political pressure and its ability to maintain control of monetary policy [11] Jerome Powell's Position - Mohamed El-Erian suggested that Chair Powell should resign to safeguard the Fed's operational autonomy [5] - Powell is expected to face tough questions at the upcoming Fed meeting regarding political considerations in setting interest rate policy [9][10] - The key question for Powell is whether he feels compelled to hold interest rates steady in the face of political pressure [10]