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Trump Softens Stance on Fed Chair Powell amid Market Rally
President Donald Trump has stepped back from his previous threats to remove Jerome Powell as Chair of the Federal Reserve. His earlier criticism of Powell, particularly regarding interest rate decisions, had caused significant turbulence in financial markets. However, Trump clarified to reporters at the White House that he does not intend to fire Powell, although he urged the Fed to act more decisively on lowering interest rates, suggesting now is an ideal time to do so.
His remarks sparked a surge in U.S. stock futures, with key indices like the S&P 500 and Nasdaq-100 rising by over 1.7% and 1.9%, respectively. The U.S. dollar also strengthened by more than 1% against major global currencies.
Markets had already been rallying earlier following comments from Treasury Secretary Scott Bessent, who indicated that the trade standoff with China was unsustainable and likely to ease. White House Press Secretary Karoline Leavitt echoed this optimism, stating the administration was making headway toward a trade deal with Beijing.
As a result, the S&P 500 closed over 2.5% higher, and the Nasdaq gained more than 2.7%. Asian markets opened strongly as well, with Japan’s Nikkei 225 and South Korea’s KOSPI rising by approximately 2% and 1%, respectively.
The economic backdrop includes a trade conflict between the U.S. and China, involving steep tariffs 145% on Chinese imports and 125% on U.S. goods in return. Trump acknowledged the severity of these tariffs but indicated they would be reduced significantly.
Financial markets have grown uneasy due to Trump’s repeated verbal attacks on Powell, which undermine the perception of the Federal Reserve’s independence an essential factor in ensuring stable economic governance. Just a day prior, Trump had labeled Powell a “major loser” for not supporting rate cuts and suggested his removal was imminent. His top adviser, Kevin Hassett, had also mentioned exploring legal options to remove the Fed Chair.
Despite Trump’s pressure, the Federal Reserve has remained cautious, particularly due to fears that tariff-driven inflation could result from rapid rate reductions. Powell, who was originally appointed by Trump in 2017 and later reappointed by President Biden, has made it clear that he will not resign voluntarily and can only be legally removed for just cause.
Legal precedent supports the independence of the Federal Reserve, and any attempt to unseat Powell before his term ends could shake investor confidence. Such a move, experts warn, might lead to a major market downturn and could even trigger a recession.
