Outgoing U.S. Treasury Secretary Janet Yellen stated that she had a conversation with Scott Bessent, who was nominated by President Trump to take over as Treasury Secretary.
On Tuesday, Yellen stated that in a call before Thanksgiving, she introduced the breadth of the department's work and the strength of its staff to senior hedge fund manager Bessent. Additionally, she reiterated her previous warnings against infringing on the independence of the Fed and broadly raising tariffs, while expressing regret over the fiscal situation.
Yellen said, 'I congratulate him on his nomination and tell him I think he will find it to be an extremely interesting and challenging job.'
She told Bessent that the Treasury's civil servants are 'analytical, business-savvy, highly professional, and upright, and can provide trustworthy analysis. This is very important for the financial markets and the economy, especially the U.S. Treasury market.'
On Tuesday, while answering questions at an event hosted by the Wall Street Journal, Yellen also emphasized the importance of allowing the Fed to operate without political interference. Trump had previously hinted that he should have a greater say in monetary policy, which would undermine the Fed's independence established over decades.
'I believe that participating in commentary on the Fed is a mistake and will certainly undermine its independence,' said Yellen, who once led the Fed. 'I think this often undermines confidence in the financial markets and ultimately erodes the confidence of the American people in an important institution.'
Yellen said, 'Research shows, and I have indeed seen from my own experience, that when central banks make their best judgments free from political influence, countries perform better—not only in terms of inflation performance but also in actual performance in job creation and growth.'
When asked whether the president could possibly remove the Federal Reserve Chair, Yellen said her understanding is that only the Senate can remove the Federal Reserve Chair for cause. However, Trump's recent stance on the Fed has softened. In an interview with NBC News last Sunday, he stated that he would not seek to remove Fed Chair Powell before his term expires in May 2026. Regardless, Trump's legal recourse is limited, but the threat itself raises concerns that the Fed may face significant challenges in the next four years.
Yellen also warned the incoming Trump administration against imposing broad tariffs, stating that this would lead to rising inflation. She said that while these types of punitive measures have some value in addressing 'unfair trade practices,' implementing widespread measures could 'adversely affect the competitiveness of certain sectors of the U.S. economy and could significantly raise costs for households.'
In 2022, due to supply shortages and suppressed demand, inflation in the United States surged to its highest point in forty years, and these price pressures may be enough to 'undermine' the progress made in reducing inflation.
Given the sharp rise in U.S. sovereign debt, Yellen remains concerned about the country's 'fiscal sustainability.' She expressed regret over not achieving greater progress in narrowing the fiscal deficit during her term.
She said, 'I am concerned about fiscal sustainability and regret that we have not made greater progress. I believe the deficit must be reduced, especially now that we are in an environment of rising interest rates.'
She said, 'The basic fiscal deficit (excluding debt servicing costs) is now slightly above 3%, and I believe it needs to be reduced relative to GDP.'
Bond giant Pimco stated this week that, considering 'sustainability issues' and the prospect of rising inflation during Trump's presidency, the company has become more hesitant to purchase U.S. long-term government bonds, which also reflects the aforementioned concerns.
This article is reposted from: Jinshi Data