US Treasury Secretary Yellen: The Federal Reserve needs to be subjected to a comprehensive review as an institution and evaluate whether it is operating successfully.

US Treasury Secretary Besent said on Monday that the Federal Reserve as an institution needs to undergo a comprehensive review and assess whether it is operating successfully. Besent refused to comment on reports that he had advised President Trump not to dismiss Federal Reserve Chairman Powell during an interview, stating that it would be up to the president to decide. However, he did say that the Federal Reserve as an institution should be subject to scrutiny and criticized it for "creating panic on trade issues," while noting that there have been almost no inflationary impacts so far. Earlier reports indicated that Besent recently privately advised Trump not to attempt to dismiss Powell. Besent warned that firing Powell could have economic, political, and legal consequences. Sources revealed that Besent warned Trump that dismissing Powell before the end of his term in the spring of next year could trigger negative reactions in financial markets and push the Federal Reserve into unknown legal and political territory. Besent also argued that the Federal Reserve appears ready to cut interest rates this year, so there is no need to remove Powell. On Monday, Besent said, "I think what we need to do now is to examine the entire Federal Reserve and assess whether it is successful." He added that he would deliver a keynote speech at the opening ceremony of the Federal Reserve's supervisory meeting on Monday evening. Besent said, "If this was the Federal Aviation Administration (FAA) and we made this many mistakes, we would definitely go back to look at the reasons. Why did this happen?" "So many PhDs are there, I don't know what they are doing." Trump has repeatedly criticized Powell harshly and urged him to resign, citing the Federal Reserve's reluctance to lower interest rates. In recent days, Trump has shifted his focus to a $2.5 billion renovation project at the Federal Reserve's headquarters in Washington, claiming the project is severely over-budget, implying potential fraud, and suggesting it could be grounds for removing Powell. Powell responded last week to a Trump administration official's questioning of cost overruns in the project, stating that it is a large-scale project involving multiple security upgrades and the removal of hazardous materials. Analysts point out that if Trump takes unprecedented action to dismiss Powell, global markets may experience a major upheaval, the dollar and US bonds may collapse. Reports indicate that the independence of the Federal Reserve is the cornerstone of the US financial markets, and any erosion of this independence may lead to substantial selling of the dollar and US government bonds, causing lasting damage to the US market, economy, and international reputation. Besent refused to comment on the prediction that "if Powell is dismissed, the US financial markets will collapse." Powell's term as Chair is set to end in May 2026, but his term as a Federal Reserve Governor will continue until January 2028. Besent stated last week that the process of confirming the next candidate for Federal Reserve Chair has been initiated. He also stated during the interview that Powell should resign from his position as a Federal Reserve Governor after his term as Chair ends in May 2026. If Powell continues to serve as a Governor, the market will be very confused.