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Former President Donald Trump has stated that he has “no intention” of dismissing Jay Powell, the Chair of the United States Federal Reserve. Trump’s comments came after speculation about Powell’s possible dismissal led to a downturn in financial markets. Despite previously criticizing Powell’s decision not to cut interest rates, Trump clarified in the Oval Office that, although he continues to urge for lower borrowing costs, he does not plan to terminate Powell’s position.
Following these remarks, speculation that Powell might be removed from his role eased. As a result, U.S. stock futures indicated upcoming gains for major indices, including the S&P 500 and Nasdaq 100, later in the day. Meanwhile, the dollar index showed improvements, whereas the Japanese yen saw a decline, with the exchange rate reaching 142.10 yen per dollar.
In Asian markets, there was a positive trend, with Japan’s Topix increasing by 2%, Hong Kong’s Hang Seng climbing 2.3%, and Taiwan’s benchmark rising 3.6%. Investors interpreted Trump’s revised stance on Powell as a sign that some of his advisors recognize the importance of maintaining the independence of key American institutions. Dec Mullarkey, a managing director at SLC Management, expressed that this shift suggests some institutional stability around the president. He credited Treasury Secretary Scott Bessent for helping guide this decision.
Powell has consistently expressed his intention to fulfill his complete term, believing that an early termination would be unsupported by U.S. law. Concerns among investors increased after Kevin Hassett from the National Economic Council mentioned that Trump would continue to evaluate the issue of Powell’s potential removal.
Historically, Hassett had supported Powell when tensions rose between Powell and Trump during Trump’s initial presidency. After Trump criticized Powell on the Truth Social platform, dubbing him “Mr Too Late,” financial markets experienced a significant sell-off. This led to the dollar hitting a three-year low against various currencies, and the S&P 500 dropping by 2.4%. However, the market rebounded after Bessent commented on the unsustainability of a trade war with China, stabilizing U.S. stocks and the dollar.
Under Trump’s administration, the Federal Reserve has faced increasing pressure, particularly since the introduction of “reciprocal tariffs” initiated by Trump. Federal Reserve officials, including Powell, have indicated that interest rate cuts would be postponed until it is clear that Trump’s trade policies would not result in long-lasting inflationary pressures. There is concern among Fed officials that the tariffs might lead to reduced growth and increased prices, potentially weakening the U.S. economy, which they previously considered stable.
Despite these challenges, Trump has continued to criticize Powell, stating on Truth Social that Powell’s termination “could not come fast enough,” following Powell’s confirmation that the central bank would not lower rates to counter potential recession fears triggered by the tariffs.
Additional reporting was provided by George Steer and Peter Wells in New York, and Arjun Neil Alim in Hong Kong.
