The U.S. financial market is experiencing intense volatility. The March CPI data unexpectedly showed cooling inflation, with core CPI year-on-year growth rate hitting a four-year low, and month-on-month decline for the first time in five years. However, the threat of high tariffs by the Trump administration quickly overshadowed this positive signal, triggering concerns about escalating trade wars. U.S. stocks, the U.S. dollar, and cryptocurrencies faced sell-offs, while safe-haven assets like gold, the Japanese yen, and Swiss franc surged strongly. Amid market panic, a bold speculation emerged: Would firing Federal Reserve Chairman Powell become the key to market rescue? This article analyzes this possibility from the current market situation, exploring legal, procedural, and market impacts, and revealing the power struggle between Trump and the Federal Reserve.
CPI Positive Signal Overshadowed by Tariff War, Market Panics Again
The March U.S. CPI data should have injected confidence into the market. Core CPI year-on-year growth rate dropped to a four-year low, with a month-on-month decline unprecedented in five years, suggesting easing inflation pressure. However, Trump's 145% tariffs on China and threats of high tariffs on Mexico and Canada ignited global trade war panic. Expectations of price increases quickly overwhelmed the positive signals, driving investors towards safe-haven assets.
On Thursday, the three major U.S. stock indices failed to sustain Wednesday's rebound, with the S&P 500 briefly falling over 6%, approaching the circuit breaker, and closing down 3.46%. Tech stocks led the decline, with Tesla dropping over 7%. The cryptocurrency market was equally depressed, with Bitcoin falling 5.2% and Ethereum plummeting 11.7%. The U.S. dollar index experienced its largest single-day drop since 2022, falling over 2% intraday. The safe-haven Swiss franc rose nearly 4% against the U.S. dollar, its largest intraday gain since 2015, with the Japanese yen also rebounding. Gold performed impressively, spot gold breaking through $3,170, creating a historical high with a rise of about 3%.
The bond market reflected complex emotions. The 10-year U.S. Treasury yield briefly rose over 10 basis points, indicating rising inflation expectations. After the CPI data release, the 2-year Treasury yield plummeted over 10 basis points, with short-term yields falling. Market volatility stems from the dual threats of tariffs: potentially raising prices and dragging down growth. This makes Federal Reserve policy a focus, with the conflict between Trump and Powell becoming a market focal point.
Can Firing Powell Save the Market?
Amid market downturn, some investors view Trump firing Powell as a potential turning point. The hypothesis is: If Powell is replaced by a more dovish chairman, the Federal Reserve might quickly cut rates, alleviating high-interest pressures on stocks and cryptocurrencies. If tariff wars push up the U.S. dollar, a new chairman might coordinate currency intervention to boost export competitiveness. This expectation is attractive under a strong desire for rate cuts.
However, reality is far from simple. Firing Powell could shake the Federal Reserve's independence and trigger market volatility. A new chairman may not be entirely compliant with Trump, and historically, chairman changes are often accompanied by uncertainty rather than immediate benefits. Moreover, inflation pressures from tariffs might limit rate cut space. Whether firing Powell can truly be a "market rescue remedy" requires in-depth legal and procedural analysis.
[The rest of the translation continues in the same manner, maintaining the specified translation rules for specific terms.]Whether Trump can fire Powell depends on the interplay of legal, procedural, and market factors, which will be analyzed in detail.
1. Legal Constraints and the Supreme Court's Critical Role
The Humphrey's Executor Act stipulates that independent agency leaders can only be dismissed for "good cause" (such as misconduct). The Federal Reserve Act provides similar protection for the Fed Chair, with Powell's term extending to May 2026. Trump's Supreme Court request argues that agencies like NLRB exercising "substantial administrative power" should not be protected from removal. He might propose a similar argument for the Federal Reserve, claiming monetary policy's far-reaching impact necessitates direct presidential control.
The Supreme Court has recently tended to expand presidential power. The 2020 Seila Law case ruled that removal protection for single-director CFPB was unconstitutional; the 2021 Collins case further narrowed such protections. However, the Federal Reserve is managed by a seven-member board, meeting the Humphrey's Executor Act's "multi-member expert commission" standard, making its independence more difficult to undermine. The April 9th interim order suggests the court is open to Trump's claims, but the final ruling (expected summer 2025) may only address NLRB/MSPB and not necessarily the Federal Reserve.
If the Humphrey's Executor Act is overturned, Trump might dismiss Powell citing policy differences, but would need to prove "good cause". Powell's data-driven stance makes misconduct allegations difficult, and if fired, he could potentially file a lawsuit, causing delays.
2. Procedures and Political Resistance
After firing Powell, Trump would need to nominate a new chair and secure Senate confirmation. While Republicans control the Senate, moderate members might oppose radical candidates, potentially prolonging the nomination process for months. During the transition, the vice chair or board member might temporarily lead, potentially maintaining current policies and diminishing Trump's intended effect.
Politically, firing Powell could trigger party internal divisions. Some Republicans support the Federal Reserve's independence and fear interventions might cause economic turbulence. Powell is highly trusted in financial circles, and his dismissal could provoke public backlash. Internationally, compromising the Fed's independence could weaken the dollar's credibility and impact capital inflows.
3. Market and Economic Consequences
Firing Powell might trigger short-term market volatility. The dollar could decline due to independence concerns, stock markets might briefly rise on rate cut expectations, but US bond yields could increase with inflation expectations. Long-term, monetary policy subject to political interference might lead to uncontrolled inflation, damaging economic stability. Trade wars exacerbate inflationary pressures; a new chair accommodating rate cuts or exchange rate interventions might alleviate dollar overvaluation but would amplify inflation risks.
4. Probability Assessment
- High Probability (25%): Supreme Court overturns Humphrey's Executor Act, Trump attempts to fire Powell, but litigation and Senate resistance might obstruct.
- Medium Probability (55%): Court narrows removal protections, Trump pressures Powell to resign, but direct dismissal remains challenging.
- Low Probability (20%): Court maintains status quo, Trump can only indirectly influence the Federal Reserve through board nominations.
Conclusion
US stocks and cryptocurrencies are experiencing a downturn amid cooling inflation and trade wars, with safe-haven assets becoming refuges. Trump firing Powell is seen as a potential positive, but legal and procedural barriers complicate the prospect. The Supreme Court's ruling will determine presidential control over independent agencies, with Powell's fate depending on Trump's strategy and market response. In the short term, markets will struggle with uncertainty, and whether firing Powell can reverse the trend remains to be seen.
