New York
CNN
—
Treasury Secretary Scott Bessent said Monday he believes the Federal Reserve system should be reviewed for potentially holding back the US economy, which is “on the cusp” of growth that could equal the dot-com boom seen in the 1990s.
“I think that’s what the paradigm or the mental model for everyone should be here,” he told CNBC’s “Squawk Box” Monday morning.
“In the ’90s we finally had the productivity growth kick in from the IT revolution. And I would say that we are on the cusp of that right now,” Bessent said.
He said leaders in the US tech sector he met with at a recent conference in Sun Valley, Idaho, told him they believe “the AI revolution is coming much faster than they thought, and could start kicking in as soon as the first or second quarter of 2026.” Because AI could require fewer human resources, Bessent believes this economic boom could come without reignited inflation.
When asked how the country should prepare for such a boom, Bessent said: “If the inflation numbers are low, then we should be cutting rates.”
The Federal Reserve has not lowered its benchmark interest rate since December, angering President Donald Trump, who has demanded that Fed Chair Jerome Powell do so. (The central bank is an independent agency that works outside of political influence, and Powell is one member of a 12-person committee that votes on interest rates.)
When asked if Trump should fire Powell, Bessent said “I think what we need to do is examine the entire Federal Reserve institution and whether they have been successful.”
“I think that we should think, has the organization succeeded in its mission? If this were the [Federal Aviation Administration] and we were having this many mistakes, we would go back and look at why this has happened.”
While Powell has said the central bank is waiting for more economic data in order to ascertain the impact of Trump’s economic agenda — especially his aggressive trade policy — Bessent said there has been “fear mongering over tariffs” and that the nation has so far seen “very little, if any inflation.”
“All these PhDs over there, I don’t know what they do. This is like universal basic income for academic economists.”
The latest inflation readings show that US consumer price increases heated back up in June, rising to their highest level in four months. “Tariffs are starting to bite,” Heather Long, chief economist at Navy Federal Credit Union, told CNN in an interview. June wholesale-level inflation was unchanged from May.
Trump appointed Powell as Fed chair in 2018 and former President Joe Biden reappointed him in 2022. His four-year term at the helm of the Fed ends in May next year, though his tenure as governor continues until 2028.
Trump has in recent weeks ramped up his distaste for Powell, calling for his “termination” and even brandished a document last week that he said was a letter firing Powell, in a meeting with Republican lawmakers. However, Trump has stopped short of taking any overt moves to remove the Fed chair. Last week, he said it was “highly unlikely” that he would fire Powell. Such unprecedented action would ricochet through global markets and trigger a lengthy legal challenge, as well as severe economic consequences that would backfire on Trump’s desire for lower rates, economists previously told CNN.
However, Bessent said last week that the Trump administration has begun the formal process of selecting Powell’s replacement, months earlier than is traditional for such a decision.
“I’m not going to deal in hypotheticals,” Bessent told CNBC Monday about the Fed chief’s future, adding, “you know, Chair Powell’s term ends in May. There’s also another seat coming up in January. So we’ll see.” (Fed governor Adriana Kugler’s term ends on January 31, opening up the possibility for Trump to appoint a governor who could eventually be elevated to the role of Chair, if Powell were to resign or be removed.)
Meanwhile, officials in the Trump administration are circling the wagons around a $2.5 billion renovation to the Fed’s headquarters in Washington, DC, with the pretext of removing Powell “for cause” due to the cost overruns and their claim that the Fed leader misled Congress when he spoke about the building’s repairs in testimony delivered last month.
Officials, including Russ Vought, director of the Office of Management and Budget, have accused Powell of presiding over a lavish overhaul of the central bank’s headquarters to include Italian beehives, water features and executive elevators whisking Fed policymakers to an executive dining room. Powell on Friday sent a point-by-point letter to Vought noting that the buildings have not been updated in almost a century and require “significant structural repairs,” in addition to asbestos abatement and “complete replacement of antiquated systems.”
Bessent said earlier this month that when he has his periodic breakfast meeting with the Fed chair, a longstanding tradition between the two officials, he prefers to eat at the central bank headquarters instead of at Treasury, noting “the Fed’s food is much better.”
