Bescent leads the selection of the Federal Reserve chair, and the foreign exchange market focuses on the direction of policy

The Trump administration is looking for an "open-minded" candidate to be the next chairperson of the Federal Reserve, Treasury secretary Scott Bessant said on Wednesday, as he interviewed 11 candidates to replace Jerome Powell, prompting a developmentfxtmForex investors are widely concerned because it could influence the future direction of monetary policy.

"Whenever I interview a potential Fed chairperson, people ask me what I'm looking for," Mr. Bescent told Fox Business. "I just need someone who is open-minded and doesn't dwell on the past but looks to the future."foreign exchange marketFrom a global perspective, this standard suggests that the Federal Reserve may adopt a more flexible interest rate adjustment strategy in the future.

The candidate lineup is hidden, and the White House and the Treasury Department are at odds

Mr. Bescent, who is expected to complete the first round of interviews in the first week of October, said on Wednesday that he was surprised by the strong performances of some of the candidates, but declined to be identified. The Treasury secretary said he planned to present Mr. Trump with a streamlined list of the strongest candidates. The process has been closely watched by FXTM foreign exchange traders, as the choice of the new chairperson will directly influence the fluctuations in the dollar exchange rate.

The latest statements suggest that Mr. Bessant is expanding his remit as the White House continues its search for a replacement for Mr. Powell, whose term as chairperson ends in May.

It is unclear how this will affect the final choice, which Mr. Trump has said will be narrowed to three: Kevin Walsh, a former Fed governor; Christopher Waller, a current Fed governor; and Kevin Hassett, director of the National Economic Council.

Mr. Bescent, on the other hand, added more candidates to the mix. Last week he went out of his way to praise Jim Bullard, the former chairperson of the St. Louis Fed, who met with him for about two hours as part of a search for a Fed chair. Mr. Bescent praised his experience, calling Mr. Bullard a monetary policy expert with a deep academic background and a deep knowledge of the Fed's institutional operations.

Reports last week that Rick Reid, head of debt at Blackstone, had also been interviewed suggest that policy uncertainty is likely to intensify for investors on FXTM's foreign exchange platform in the coming months.

The Treasury Secretary has sharply commented on the current situation of the Federal Reserve, calling for structural adjustment

Mr. Bescent, who is overseeing the search for the next Fed chairperson, has said he has no intention of taking the job and has continued to be outspoken about how the central bank should reform.

He has offered a range of criticisms, from an opinion piece earlier this month that ranged from the Fed's "mission creep" and "institutional bloat" to its sluggish response to interest rate action, which he believes has left the Fed behind at a time when the labor market has begun to slow.

The Fed needs to "change course", "restore its credibility as an independent institution" and conduct "honest, independent and non-partisan reviews", Mr. Bescent wrote. For FXTM participants, questions about the Fed's independence could trigger long-term currency volatility.

He added: "The Fed's independence is being threatened by the excessive use of unconventional policies, the sprawling mandate and the bloated institution, and the Fed must change its approach."

Mr. Bescent also did not stop criticising Mr. Powell, the Fed chairperson who has come under fire from the White House for failing to cut rates sooner. The Fed cut its base rate by 25 basis points last week, its first cut in 2025.

"Interest rates are too restrictive and have to be lowered, and I'm a little surprised that the Fed chairperson has not signalled that we will cut rates by at least 100 to 150 basis points before the end of the year," Mr. Besant told Mr. Bartiromo on Wednesday morning. The rise in interest rate cut expectations has FXTM foreign exchange traders reassessing the short-term holding value of the dollar.

The internal divisions within the Federal Reserve are heating up, and the policy path game is intensifying

Stephen Millan, Mr. Trump's latest Fed governor, was the lone dissenter in last week's decision to cut rates, arguing for a bigger cut at the time, while other officials predicted only two more cuts in 2025, highlighting a rift in decision-making.

Michelle Bowman, another Fed governor appointed by Mr. Trump, said on Tuesday that she feared the central bank could fall behind if it did not ease more aggressively.

Mary Daly, president of the San Francisco Fed, said on Tuesday that further rate cuts were "likely" to be necessary and that she "fully supported" last week's 25 basis point cut, a divergence of views that for FXTM foreign exchange investors means the dollar may lack a clear direction in the short term.

She added: "Looking ahead, further policy adjustments are likely to be needed as we restore price stability while providing the necessary support to the labour market, as reflected in our latest forecasts published last week. But these are forecasts, not promises." This divergence bodes well for a tough game over the future path of monetary policy.

Analysis of the potential impact on the dollar

Policy uncertainty can lead investors to reduce their bets on the dollar or seek safe havens in other relatively stable currencies, putting selling pressure on the dollar.

Mr. Bescent's comments were highly indicative. He not only criticised Mr. Powell for being slow to act, but also explicitly called for further interest rate cuts before the end of the year. Interest rates are at the heart of currency prices, and the expectation of faster and deeper cuts would directly reduce the interest rate attractiveness of the dollar, causing capital to flow out of dollar assets. FXTM foreign exchange analysts pointed out that such expectations have put pressure on the short-term dollar index.

Divisions within the Fed are growing, with clear policy paths diverging between Trump-appointed governors (Milan, Bowman) and relatively technocratic officials (such as Daley). Markets are concerned that the Fed's independence is being politically eroded. A politicized central bank would lose policy credibility and call into question the long-term value of its currency.

At 15:20 Beijing time, the US dollar index was trading at 97.79.