WASHINGTON: U.S. President Donald Trump said Tuesday he has no intention of removing Federal Reserve Chair Jerome Powell, dialing back previous threats that had rattled financial markets and raised concerns about political interference in monetary policy.
“I have no intention of firing him,” Trump told reporters at the White House, while reiterating his call for the Fed to be more aggressive in cutting interest rates. “I just wish he’d be a little more active.”
The statement marked a sharp shift in tone after a weekend of renewed criticism of the central bank, which triggered a drop in stocks, Treasury yields, and the U.S. dollar on Monday. Fears had been mounting that Trump might take unprecedented action against Powell, undermining the Fed’s independence.
Markets responded positively to the president’s reassurances, with equity futures rebounding nearly 2% in after-hours trading Tuesday.
Analysts welcomed the move, noting that even the suggestion of Powell’s dismissal had injected instability into global markets. “Whether this reflects a response to Monday’s sharp sell-off or was intended from the start, it’s clearly a relief,” said Krishna Guha, Vice Chairman at Evercore ISI. “It eases immediate fears of a policy crisis, although broader risks remain.”
Trade Talk Progress Adds Boost
Adding to the market rebound, Trump also hinted at progress in U.S.-China trade talks, suggesting that a potential deal could lead to a “substantial” reduction in tariffs on Chinese goods. “It won’t be zero,” he noted, “but it won’t be anything close to current levels.”
The comments provided relief to investors worried about the prolonged trade war’s impact on inflation, global supply chains, and economic growth. Since February, the administration has imposed a series of sweeping tariffs, sparking concerns of stagflation.
Uneasy Truce With Powell
Despite his softer stance, Trump maintained pressure on the Fed to ease monetary policy further, arguing that rate cuts are essential to support the economy. “It’s the perfect time to lower rates,” he said. “We want our chairman to be early or at least on time — not late.”
Trump’s frustration with Powell dates back to early in his presidency. Though he personally nominated Powell as chair, Trump grew increasingly critical as the Fed raised interest rates through 2018 and 2019, contrary to the White House’s push for looser monetary policy.
At various points, Trump had called Powell a “major loser” and openly floated the idea of removing him.
Legal Gray Area
Whether the president could legally fire Powell remains a matter of debate. The Federal Reserve Act of 1913 allows the removal of Fed governors “for cause,” typically interpreted as misconduct rather than policy disagreements.
Powell’s dual role—as Fed Chair with a four-year term and as one of seven governors with a 14-year term—adds to the legal ambiguity, fueling speculation over possible executive overreach.
The issue has gained broader significance amid legal battles over Trump’s authority to dismiss leaders of other independent agencies.
Fed Holds Steady
The Federal Reserve has kept its benchmark interest rate unchanged at 4.25%–4.50% over its past two meetings, citing uncertainty around trade tensions and inflationary risks. Policymakers have signaled a cautious approach, weighing the potential for further cuts later this year.
While labor market and retail data remain solid, recent surveys show falling consumer and business confidence, pointing to increased downside risks. As a result, market expectations for rate cuts have moderated — with three quarter-point cuts now priced in by year-end, down from four earlier.
Meanwhile, the International Monetary Fund (IMF) on Tuesday downgraded its 2025 growth forecasts for both the U.S. and global economy, citing the impact of Trump’s trade policies.
