Key facts
- Treasury Secretary Scott Bessent called for an investigation into the Federal Reserve.
- Bessent questioned the Fed's fulfillment of its mandate and accused it of 'fear-mongering' over tariffs.
- The Treasury plans to increase purchases of longer-dated government bonds.
- The call for an investigation occurs amid tensions between the Trump administration and Fed Chair Jerome Powell.
Treasury Secretary Scott Bessent has escalated criticism of the Federal Reserve, publicly calling for an investigation into the central bank's operations and effectiveness. Bessent questioned the Fed's fulfillment of its mandate and accused it of 'fear-mongering' regarding President Trump's tariffs, suggesting the central bank's economists are intellectually rigid. This demand for an inquiry occurs amid ongoing tensions between the Trump administration and Fed Chair Jerome Powell, with other administration officials criticizing Powell over interest rate policy and the Fed's $2.5 billion headquarters renovation. President Trump has consistently advocated for lower interest rates to boost the economy.
Separately, Bessent's plans to increase Treasury purchases of longer-dated government bonds, aimed at calming markets and addressing rising borrowing costs, have drawn skepticism. While the move initially triggered a rally in 10- and 30-year Treasuries, yields quickly reversed higher. Analysts like Charlie McElligott of Nomura described the program as a 'band-aid on a bullet hole,' arguing it would not overcome market forces driven by fiscal deterioration and heavy borrowing. Bessent has argued that current Treasury yields do not reflect economic fundamentals and indicated the administration plans to unveil measures for fiscal discipline, though the Congressional Budget Office projects deficits significantly above Bessent's stated objectives.