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The White House and the Fed escalate conflict, from policy differences to a game of comprehensive review
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Hello everyone, today XM Foreign Exchange will bring you "[XM Foreign Exchange Decision Analysis]: The conflict between the White House and the Federal Reserve escalates, from policy differences to a game of xm-links.comprehensive review." Hope it will be helpful to you! The original content is as follows:
Recently, tensions between the White House and the Federal Reserve have continued to heat up, and the focus of the conflict has spread from the overspending disputes in the renovation of the Washington headquarters building to the deep game between monetary policy and the core functions of the institutions. On July 21, 2025, Treasury Secretary Scott Bescent publicly called for a "comprehensive review" of the Federal Reserve in the media, pushing the struggle to climax.
xm-links.comprehensive review proposal: Directly pointing to institutional effectiveness
Bester clearly stated in the interview: "We need to examine the entire Federal Reserve institutions and whether they have succeeded. Has the organization fulfilled its mission? If this is the Federal Aviation Administration and so many mistakes have occurred, we will look back and explore the reasons." This proposal goes beyond the current controversy surrounding the $2.5 billion building renovation project, directly pointing to the overall functions and performance of the Federal Reserve.
Bester clearly supported looser monetary policies in the interview. He believes that the current inflation has been "basically alleviated", and criticized the Federal Reserve's "panic propaganda" on the impact of tariffs that exaggerated the inflation risk: "They are trapped in a certain fixed mindset and are difficult to break through. There are so many doctors there, and I don't know what they are doing."
From policy practice, the Federal Reserve xm-links.completed a short-term easing cycle in December 2024, lowering the federal funds rate by 1 percentage point to 4.25%-4.5%. But unexpectedly, after the implementation of the loose policy, mortgage interest rates and treasury bond yields rose instead of falling, which triggered market doubts about the effectiveness of the policy. Current market pricing shows that the Fed may cut interest rates again in September 2025, but the Trump administration’s demand for a “significant interest rate cut” is clearly in conflict with the Fed’s “data-driven” decision-making principles.
The renovation of two Fed headquarters buildings in Washington became another major focus. The project's total budget is US$2.5 billion, and it has exceeded the expenditure by about US$700 million, which has caused strong dissatisfaction from the White House.
The Federal Reserve previously clarified through its official website that overspending mainly stems from "increased material costs" and "historical building pollution problems (such as asbestos exceeding the standard)", and denied that there was "luxury facility construction". But the outside world generally believes that this controversy has been used by the Trump administration as a "breakthrough" to pressure Federal Reserve Chairman Jerome Powell, and Powell's term will end in May 2026, and the White House may use this to pave the way for early removal.
Bester's double positioning
In this conflict, the role of Finance Minister Becente is particularly subtle. He is not only a potential hot candidate for the next Fed chairman, but also a report by the Wall Street Journal that he had "dissuaded Trump from firing Powell." Faced with this rumor, Becent responded vaguely: "President Trump will solicit various opinions before making a decision."
Trump publicly demanded Powell's resignation many times recently, saying that if he "mislead Congress" in the renovation project, he should "resign immediately", but then denied that he was preparing to initiate the dismissal process, which is legally controversial and may cause turmoil in the financial market. On social media platform X, public opinion is polarized: some users question Trump's attempt to weaken the Fed's independence through censorship, while supporters believe censorship helps improve institutional transparency.
Federal independence dispute
Becente's "comprehensive review" proposal has no specific form or enforcement entity at present, but it has attracted high attention from the market. Analysts pointed out that if the review focuses on optimization of institutional effectiveness, it may promote Fed reform; but if it evolves into a tool of political intervention, it will directly impact the Fed's independence, and this principle is regarded as the core pillar of US monetary policy stability.
Wall Street institutions released a research report on July 21 saying that Becent's financial professional background may help balance the White House's radical policies with market stability demands, but in the context that the Trump administration's promotion of tax cuts and tariff policies may exacerbate the fiscal deficit, the uncertainty caused by the review may lead to fluctuations in the US dollar exchange rate and US Treasury yields.
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