Bessent asks if Fed has succeeded in its mission. Stats say: Yes.

This morning on CNBC, Treasury Secretary Scott Bessent said it’s time to examine the Fed:

What we need to do is examine the entire Federal Reserve institution and whether they have been successful. 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 has this happened.

The Fed’s mission is a dual mandate to keep both unemployment and inflation low.

In very simplest terms, higher Fed rates help reduce inflation, and lower rates help maximize employment.

All Fed policy works on long lags, so the Fed is always criticized for timing of rate hikes or cuts as it seeks to balance its dual mandate.

So the real debate is this:

Is today’s waiting-to-cut stance a mistake by the Fed? Or are they simply taking time needed to achieve their dual mandate?

One thing is certain:

The Fed would be equally criticized if they were going faster on cuts in 2025. “They’re reigniting inflation!” would be the cry.

So the Fed’s job — in addition to its dual mandate — is to make rate and other policy decisions for the long term, not for news or political cycles.

Which means the consumer’s job is to sort through political discourse for what’s actually news.

With that said, it’s worth zooming in on Bessent’s main question today:

Has the Fed succeeded in its mission?

This is code for:

Is the Fed succeeding in its dual mandate of delivering low inflation and low unemployment?

With the U.S. economy at 4.1% unemployment and 2.7% Core PCE inflation, the stats suggest the answer is Yes … so far.

After the CNBC interview, Bessent defended the Fed’s independence on X, saying this:

The Fed’s conduct of monetary policy “is a jewel box” that should be walled off to preserve its independence. This independence is a cornerstone of continued U.S. economic growth and stability.

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Reference:

– Treasury Secretary Bessent calls for a review of ‘the entire’ Federal Reserve (CNBC)

– Here’s Bessent’s full post on X