Federal Reserve Chair selection enters final stages, Powell says Trump may make decision before Christmas.

U.S. Treasury Secretary Benson said on Tuesday that President Trump is expected to decide on the next Federal Reserve chairman before the Christmas holiday. He revealed in an interview that a crucial second round of interviews will take place today, so he is not ready to make any judgments on the final candidate yet. He emphasized once again that Trump may announce his nomination decision by December 25th. Benson revealed that a core theme during the candidate interviews is "how to make the Federal Reserve simpler." He stated that the current Federal Reserve has become overly complex in managing the monetary market, "I realize that the Federal Reserve has evolved into a very complex institution." Therefore, in the selection criteria, he is particularly focused on candidates' understanding of the interaction between various policy tools of the Federal Reserve. He said: "During the interviews, we particularly emphasize how these tools are calculated and what the relationships between them are." The final list of candidates widely believed to include: Federal Reserve governors Waller and Bowman, former Federal Reserve governor Warsh, Chairman of the National Economic Council Hassett, and BlackRock executive Rieder. Benson pointed out that the Federal Reserve currently uses the so-called "abundant reserves" framework, controlling policy rates by holding a large amount of U.S. Treasuries, paying interest on excess reserves held by banks at the Federal Reserve, and also paying interest to money market funds for temporary cash placements. He believes that this framework is showing signs of "loosening at the margins," and "it appears that reserves in the system may not be as 'abundant' as imagined." To ensure liquidity, the Federal Reserve announced last month that it would stop reducing its balance sheet starting from December 1st to prevent an excessive tightening of reserve funds in the system. Prior to that, since June 2022, the Federal Reserve has been shrinking its balance sheet to unwind the massive expansion of purchasing U.S. Treasuries and MBS during the COVID-19 pandemic. Benson specifically mentioned a series of tools under the current regime, such as the standing repo facility. This tool allows eligible institutions to borrow cash from the Federal Reserve using U.S. Treasuries or agency securities as collateral, and its usage has increased significantly in recent times, reaching $50.4 billion on October 31st, the highest since its establishment in 2021. He said: "We have too many tools, too many operational mechanisms, I think we need to simplify these." However, he did not specify how he envisions the Federal Reserve reforms to be carried out. Benson believes that the relationship between monetary policy, balance sheet management, and regulatory policies has become overly complex, and the Federal Reserve needs to clarify the chain of interactions between these policies. He stated: "There is a very complex relationship between these three, and what we emphasize in the interviews is how the candidates understand this." Trump has long been critical of the Federal Reserve, and recently expressed his desire to "very much" dismiss Powell, encouraging Benson to "find a way" to push for a rate cut by the Federal Reserve. He even joked with Benson, saying, "If you can't solve it quickly, I'll fire you." Benson responded, "If you were there at the time, you would know he was joking." But at the same time, he emphasized that monetary policy is now much more complicated than simple rate cuts. Powell's term will expire in May 2026, and before then, he will have to address the internal divisions within the Federal Open Market Committee (FOMC). The committee is currently sharply divided on whether further rate cuts are necessary. According to the latest statement from New York Fed President Williams, the market expects the FOMC to approve a third consecutive rate cut at the December meeting. When talking about the future role of the Federal Reserve, Benson once again emphasized the hope that the Federal Reserve should "step back into the background." He said: "I think it's time to get the Federal Reserve back to the background position, as in the past, to calm the market and serve the American people." He even pointed out that the public speeches by Federal Reserve officials are too frequent, "We need to calm down the repetitive speeches of these Fed presidents."