Scott Bessent, the current U.S. Treasury Secretary and a key figure in President Donald Trump’s potential second-term economic team, is increasingly viewed as a serious contender to succeed Jerome Powell as the Federal Reserve chair. This development, reported by Bloomberg, suggests a potential shift in the Federal Reserve's approach to monetary policy, with many anticipating a more dovish stance and possible interest rate cuts.

The speculation surrounding Bessent's potential appointment has already influenced market sentiment, particularly boosting tech stocks. Vikram Kasat, Head of Advisory at PL Capital, noted, “U.S. media say Bessent is seen as a contender to be the next Fed chair. If it happens, then IT stocks will become blind buy with strong likelihood of interest cuts and accommodative monetary policy as happened in India.” Market participants are interpreting Bessent’s past comments, such as his May interview with Fox Business where he urged rate cuts, as indicative of his future policy direction. He observed at the time, “We are seeing that two-year rates are now below fed funds rates... That's a market signal that they think the Fed should be cutting,” when the two-year Treasury yield was 3.56% against the Fed’s 4.33% benchmark rate.

President Trump has indicated he would name Powell's successor “very soon,” as Powell's term concludes in May 2026. Responding to inquiries about the Fed chair role, Bessent told Bloomberg, “I have the best job in Washington. The president will decide who’s best for the economy and the American people.” A growing number of advisers, both within and outside the Trump administration, reportedly back Bessent. Tim Adams, CEO of the Institute of International Finance, described Bessent as a “dark horse” in the race, highlighting the global financial community's trust in him. While former Fed Governor Kevin Warsh is also considered a candidate, Bessent's name is gaining prominence.

Despite his calls for monetary easing, Bessent has maintained a fiscally conservative stance as Treasury Secretary. He has proposed a “3/3/3” plan aiming for 3% GDP growth, 3% annual deficits, and a three-million-barrel-per-day increase in domestic oil output. These measures are intended to stabilize the national debt at 100% of GDP and could potentially reduce Treasury issuance, thereby helping to cap long-term interest rates. However, Bessent’s alignment with Trump’s aggressive trade policies, including tariffs and reshoring supply chains, introduces a layer of complexity. Such policies could fuel inflation, complicating any efforts to ease monetary conditions. Steve Bannon, former White House strategist, remarked to Bloomberg, “Scott Bessent proved he could implement President Trump’s agenda during an incredibly turbulent first six months.”

The prospect of Bessent leading the Fed is under close scrutiny by both equity and bond investors. While his fiscal strategies suggest potential downward pressure on yields, the inflationary risks associated with trade policy remain a significant concern. Any unexpected rise in core inflation could compel the Fed, regardless of its chair, to adopt a more hawkish stance, potentially reversing recent gains in rate-sensitive stocks. Bond markets, which have rallied on expectations of easing, might face volatility if inflation surpasses forecasts. Sectors like technology and real estate, which benefit from low borrowing costs, could see gains if rates fall but also face downside risks from supply chain disruptions or renewed tariff conflicts. Although formal interviews for the Fed position have not yet commenced, according to Bloomberg, markets will continue to monitor signals regarding how the Trump administration’s economic agenda might shape the future of U.S. monetary policy, especially with Bessent playing a central role in the selection process as well as being a candidate.