The White House on Friday called for a comprehensive review of the U.S. Federal Reserve after new jobs data showed the economy added just 22,000 positions in August, piling pressure on the central bank and its leader, Jerome Powell, to cut interest rates.
Treasury Secretary Scott Bessent urged an "honest, independent, nonpartisan review of the entire institution," saying the examination should include the Fed's authority to set interest rates. The statement followed official figures that fell far short of analyst forecasts and briefly lifted expectations that the Fed will reduce borrowing costs at its meeting later this month.
Markets initially reacted to the weak payrolls report with a rally in equities on hopes of an imminent rate cut, but stocks subsequently retreated amid investor concern that the slow job growth could signal a broader economic slowdown. The administration's call for an institutional review adds a political element to market scrutiny of monetary policy decisions.
The White House escalation comes amid a string of confrontations between the administration and the Fed. Officials announced that President Donald Trump attempted last week to remove Lisa Cook from the Fed's Board of Governors. Trump has also previously discussed the possibility of dismissing Powell, intensifying scrutiny of the central bank's independence.
The August jobs tally — 22,000, according to the Bureau of Labor Statistics — represents a sharp deceleration from prior months and was materially below consensus expectations. Economists and market participants typically view employment data as a key gauge of economic momentum and a central consideration in the Fed's policy deliberations.
Bessent framed the review request as nonpartisan and procedural, focusing on institutional powers rather than singling out individual policymakers. He said the aim should be to examine how the Fed's tools and authorities function in the current economic environment. The White House did not provide a timeline or specific review mechanism in its announcement.
While calls for oversight of the Fed have arisen periodically from both political parties, direct attempts to remove sitting Federal Reserve governors are rare and raise legal and political questions. The Fed's structure is designed to afford it independence to pursue its dual mandate of maximum employment and stable prices.
Federal Reserve officials have in recent months signaled caution as they weigh the balance between controlling inflation and supporting growth. Weak labor-market readings sharpen the debate within the central bank over the timing and extent of any rate reductions. Market expectations had leaned toward a cut at the upcoming meeting after the jobs report, but investors later tempered those expectations as recession fears re-emerged.
Financial-market reaction underscored the stakes. U.S. equity indexes opened higher on prospects of easier policy, then pared gains and moved lower as analysts and traders assessed whether the payrolls slowdown reflected transient softness or the start of a deeper downturn. Bond markets and futures pricing shifted in tandem, recalibrating the odds of Fed action at the next policy meeting.
The White House move is likely to shape discussions in Washington and on Wall Street in the coming days. Lawmakers, analysts and market participants will be watching for responses from the Fed and further economic data that could influence whether the central bank decides to ease policy as many investors currently expect.
The administration's demand for a review adds to a heightened political backdrop as the Fed approaches a pivotal policy choice. Any formal review, its scope and the sources enlisted to carry it out could have implications for perceptions of central-bank independence and for how future monetary policy decisions are made.
Officials in the Fed's leadership did not immediately respond to the White House request. The coming days are likely to bring intensified scrutiny of incoming economic indicators, statements from Fed officials and market moves as policymakers and investors reassess the outlook for growth, inflation and interest rates.