'I would hope' Powell steps down from Fed board when chairmanship is up: Faulkender

A top Treasury Department official said Wednesday he would like to see Federal Reserve Chairman Jerome Powell step down from the central bank's Board of Governors after his term as chair ends next May.

"It has traditionally been the case that when a Fed chairman term ends, and they're no longer going to be chairman, that they don't stay on the Board of Governors,” Deputy Treasury Secretary Michael Faulkender told Yahoo Finance in an interview.

"I would hope that Chairman Powell follows tradition along those lines."

The comments were the latest sign that the Trump administration is eager for Powell to exit the Fed as it considers its options for replacing the chair and putting its own imprint on the powerful central bank board that helps decide whether interest rates go up or down.

Michael Faulkender testifies during his Senate Finance Committee confirmation hearing in March, before becoming deputy Treasury secretary. (Tom Williams/CQ-Roll Call, Inc via Getty Images) · Tom Williams via Getty Images

A new 14-year Fed board seat opens up with Fed governor Adriana Kugler's scheduled departure on Jan. 31. The administration is currently discussing who should fill that seat. It also hopes it will have a second seat to fill when Powell's chairmanship is up next May.

But Powell has not said whether he intends to give that up.

Trump's search for a successor to Powell is getting louder as candidates compete to publicly criticize the central bank and more options emerge for filling that seat.

Read more: How much control does the president have over the Fed and interest rates?

The Wall Street Journal reported Tuesday that National Economic Council Director Kevin Hassett is now a serious contender for the job. He has talked to Trump about it twice in June and reportedly said he would take the job if asked.

One option that has been discussed, according to the Wall Street Journal, is that Hassett first gets appointed to fill the seat that is vacant on Jan. 31, and then Trump can decide if he wants to appoint Hassett — or another Fed governor, such as Christopher Waller — as chair when Powell's chairmanship is up next May.

Other candidates, including Treasury Secretary Scott Bessent and former Fed governor Kevin Warsh, are also making their views of the Fed more public.

US Treasury Secretary Scott Bessent. (Reuters/Nathan Howard/ File Photo) · Reuters / Reuters

Warsh just this week talked with Fox Business about "bad economic policies coming from the central bank." Bessent has spent recent weeks unfurling a string of criticisms about the Fed while not denying being among the candidates to eventually take Powell's seat.

Faulkender told Yahoo Finance that the president is already talking to people for the position.

"He's going to cast a wide net. He's going to talk to a lot of people," he said.

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The president has been calling on Powell to lower rates and has made it clear he wants the next Fed chair to make that happen. Faulkender on Wednesday said there is a case for the Fed to ease its monetary policy.

Read more: How the Fed rate decision affects your bank accounts, loans, credit cards, and investments

"If you look at our interest rate environment compared to other places around the world, there seems to be cause for bringing interest rates down," Faulkender said. "I think that the economy would be well served by the Fed taking another look and identifying whether it truly is currently in the right spot on interest rates."

"I think one is hard-pressed to look at the data and come to the conclusion that we are in an environment where inflation is a significant challenge to the American worker," he added.

Federal Reserve Chair Jerome Powell. (Reuters/Kevin Mohatt/File Photo) · Reuters / Reuters

Minutes from the Fed's last policy meeting in June, released Wednesday, showed that most Fed members thought lowering rates sometime this year would be appropriate, noting that upward pressure on inflation from tariffs may be "temporary or modest."

But only a "couple" said they would be open to cutting rates as soon as the next meeting later this month.

Trump-appointed governors Michelle Bowman and Christopher Waller have both said since the June meeting that they think there is a case to be made for lowering rates as early as this month's meeting on July 28-29.

Some Fed officials said at the last meeting in June that they don't see any rate cuts this year, according to the minutes, because they believe there is "meaningful" upside risk to inflation given elevated short-term inflation expectations.

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