Scott Bessent backs down on Fed chair, easing pressure on US bond market

The bond market shook off its panic and pushed upward on Wednesday after Scott Bessent, the U.S. Treasury Secretary, told everyone that Jerome Powell is not going anywhere just yet.

That single message turned attention away from a possible Fed crisis and back to what actually moves the market: interest rates.

The 10-year Treasury yield climbed more than 3 basis points, sitting at 4.368%. The 2-year yield ticked up just under 2 basis points to 3.846%, and the 30-year moved over 3 basis points to 4.94%. One basis point is 0.01%, and as always, yields rise when bond prices fall. But really, investors were never ever skittish over Trump wanting Powell out.

Scott calms bond markets with Powell defense

The wave started Tuesday when Scott told CNBC that he didn’t believe Powell needed to resign. At the same time, President Donald Trump, who had spent months bashing Powell and teasing his removal, said, “he’s going to be out pretty soon anyway.” That line alone took some of the weight off traders who had been bracing for a nasty legal fight or worse; market chaos.

That helped the market refocus on what’s next: the July 29-30 Fed policy meeting. Expectations are set on the Fed holding rates where they are, especially with inflation now running at 2.7%, up from 2.4% in May.

Trump keeps yelling for a rate cut, but the Fed isn’t moving just yet. Powell didn’t even address the outlook during a speech on Tuesday. He skipped rate talk entirely and focused on banking regulation instead.

Meanwhile, stocks got a push from a U.S.-Japan trade deal. The agreement locks tariffs at 15% and sparked hope that more deals could follow, including something with the EU. That gave equities room to run while bonds digested the Powell news.

Trump pressures Fed with internal scrutiny

But don’t mistake this calm for a full ceasefire. Scott had said on CNBC earlier this week that he wants the Fed’s entire operation reviewed. Then he followed up by saying that doesn’t mean Powell should quit. “I know Chair Powell. There’s nothing that tells me that he should step down right now. He’s been a good public servant,” Scott told Fox Business. “His term ends in May. If he wants to see that through, I think he should. If he wants to leave early, I think he should.”

That’s not exactly a full endorsement, but it’s also not a push out the door. Still, Trump isn’t backing down. He’s made it known he wants Powell gone and has openly floated the idea of removing him. But so far, Powell hasn’t given any hint that he’ll step aside.

The administration’s latest line of attack is the Fed’s $2.5 billion renovation project, which has gone wildly over budget. That’s become a convenient target for Trump allies looking to tighten the screws. Still, Scott insists that any review should be handled inside the Fed—not politically. He said that monetary policy decisions should be kept “off to the side” in what he called a “jewel box”, separate from outside influence.

He added, “Everything else that the Fed has done over the years has just grown and grown and grown, and this is what happens when you don’t have oversight.” His view is that Powell has a shot to fix all of that and shape his legacy by shrinking the Fed’s non-monetary roles.

Whether Powell will take up that offer is unclear. But he’s shown no sign of quitting. And unless he walks on his own, he’s legally protected from being fired outright over policy disagreements.

Next week’s FOMC meeting is the next key event. Trump wants deep rate cuts. The Fed likely won’t deliver. Most members want to see how the tariffs are affecting inflation before making any new moves. That puts everyone in wait-and-see mode again, but with one less panic headline in the way… for now.

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