Bessent Warns: Next Fed Chair Must Look Beyond Rates—Or Risk Irrelevance

Monetary policy can't run on autopilot anymore.

The next Federal Reserve chair needs a playbook that goes beyond hiking or cutting rates—unless they want to pilot the economy like a 20th-century relic.

Here's why the Fed's next move demands crypto-level adaptability.

Rates are just one lever in a digital-first financial system. DeFi protocols already bypass traditional monetary tools, and CBDCs will rewrite the rulebook entirely. The Fed either evolves or gets left holding an empty toolbox.

Bonus jab: Wall Street still thinks 'forward guidance' counts as innovation.

Bessent outlines broader meaning of “strong dollar” policy

Regarding currency strategy, Bessent explained that his administration’s concept of a “strong dollar” isn’t linked to a specific number shown on markets, but to the dollar’s comparative position against other currencies. “The strong dollar policy is to have policies that continue to keep the U.S. dollar the reserve currency,” he said. “And if we have good economic policies, then the dollar will naturally be strong.”

Bessent has previously held talks on exchange rates with Japan’s Finance Minister Katsunobu Kato. In May, during a G7 meeting, they concluded the dollar-yen exchange rate at that moment aligned with underlying fundamentals. In June, the Treasury Department informed Congress that the Bank of Japan should maintain its course of policy tightening, which it argued WOULD help “normalize” the yen’s weakness.

Bessent said he believes that as long as the BOJ focuses on fundamentals such as inflation and growth, exchange rates will adjust on their own. He said Governor Kazuo Ueda and the BOJ board are aiming for an inflation target rather than a currency level.

The BOJ last year wrapped up a decade of large-scale stimulus and raised short-term interest rates to 0.5% in January, concluding that Japan was close to sustainably reaching its 2% inflation goal. Since then, policymakers have been cautious about further hikes.

Analysts point to this gradual pace as one factor behind the yen’s weak performance against major currencies. While inflation has stayed above the 2% target for more than three years, Ueda has urged careful review of how U.S. tariffs might affect Japan’s fragile economy.

List of potential Powell successors grows

There are now about 10 possible replacements for Powell. Among them are former St. Louis Fed President James Bullard, now dean of Purdue University’s business school, and Marc Sumerlin, who served as an economic adviser to President George W. Bush. National Economic Council Director Kevin Hassett, former Fed Governor Kevin Warsh, and current Fed Governor Christopher Waller are also being considered.

Trump has made clear he wants a chair willing to cut rates. Hassett, Warsh, and Waller have all indicated openness to lowering borrowing costs. Bullard said in May he believed the Fed could reduce rates by September. Sumerlin’s recent stances on monetary policy are not publicly known.

The president moved quickly to fill another Fed Board position this week after Governor Adriana Kugler resigned. Stephen Miran from the Council of Economic Advisers will finish her term, which ends January 31. TRUMP is also continuing his search for a nominee to fill the upcoming 14-year term starting February 1.

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