Scott Bessent Criticizes Fed's 2022 Policies as Failure

Scott Bessent, a prominent figure in the financial world, has openly criticized the Federal Reserve's actions in 2022, labeling them as a failure. In an interview, Bessent stated that the Fed's policies have led to a situation where the central bank is now "stuck looking down," unable to effectively address the economic challenges at hand. He attributed this to the Fed's misjudgment in handling inflation, particularly from tariffs, which he believes does not exist or would only result in a one-time price adjustment.

Bessent's comments come at a time when the White House is considering potential successors for Fed Chair Jerome Powell. Bessent confirmed that a replacement for Powell is on the horizon and could be appointed as early as May or through a seat that opens in January. He also hinted that the White House is looking within the Fed for potential candidates, suggesting that the process is already underway.

In addition to his critique of the Fed, Bessent also addressed the current economic landscape, including trade negotiations and the role of stablecoins in the Treasury market. He emphasized the importance of reducing the debt-to-GDP and deficit-to-GDP ratios, stating that the administration is focused on improving these metrics over the next year.

Bessent also discussed the ongoing trade talks, highlighting July 9 as a critical deadline for securing deals with key partners. He described the negotiations as intense, with a focus on cutting tariffs and removing non-tariff barriers. If these talks fail, the April 2 tariffs will be reinstated, a decision that ultimately rests with the President.

On the topic of cryptocurrency, Bessent confirmed that the Stablecoin bill, known as the Genius Act, has passed the Senate and is now in the House. He expressed a strong desire for the bill to be passed as is, emphasizing the potential of stablecoins to become a key player in the Treasury market. Bessent believes that stablecoins backed by US Treasuries and regulated under US best practices would be a more attractive option compared to a central bank digital currency (CBDC) from the European Central Bank (ECB).

Bessent also dismissed the Congressional Budget Office's (CBO) 1.8% growth forecast, suggesting that it does not apply to the current administration's policies. He pointed to the success of previous deregulation and tax policies under the Trump administration, indicating confidence in the ability to achieve similar results.

Regarding the issuance of longer-dated bonds, Bessent advised against it at the current time, citing the high interest rates. He noted that the ten-year yield has already fallen by almost half a percentage point since January and expects it to continue decreasing as inflation remains tame.