Author: Zhao Yuhe, Wall Street Insight
Previously critical of Federal Reserve Chairman Powell for not lowering interest rates quickly enough and even threatening to fire him, US President Trump stated on Tuesday that although he remains dissatisfied with the Fed's failure to reduce rates more rapidly, he has no intention of firing Powell.
When asked to confirm whether he is seeking to remove Powell from his position, Trump responded in the Oval Office: "Absolutely not, never."
"This is just media speculation. No, I have no plans to fire him. I just want him to be more proactive about interest rate cuts."
"Would it be the end of the world if he doesn't do so? No. But now is indeed an appropriate time. In any case, I have no intention of firing him."
However, Trump still reiterated his criticism of Powell.
"We believe now is an excellent time for rate cuts, and we hope our chairman acts in advance or on time, rather than falling behind."
Trump had been pressuring Powell for rate cuts in recent days. On Monday, he even called Powell a "complete failure" and suggested previous Fed rate cuts were to help former US President Biden.
Last week, Trump said he couldn't wait to see Powell "fired", and claimed that if he tried to remove him, Powell would leave. White House National Economic Council Director Kevin Hassett told reporters last Friday that Trump was examining whether he had the authority to fire Powell, following the president's repeated criticism of the Fed on social media and in public speeches.
Additionally, before the European Central Bank lowered its benchmark rate by 0.25 percentage points to 2.25% last week, Trump had harshly criticized Powell, repeatedly complaining that the Fed was not cutting rates quickly enough. Trump had called Powell a "total failure" and stated: "If I wanted him to go, he would leave quickly", urging immediate rate cuts, which raised concerns about potential interference with central bank independence.
Trump's Attitude Change Calms Market Sentiment, US Stocks Rise After Hours
Analysts believe this statement aims to ease market tension and marks a significant shift in Trump's attitude. Previously, he had continuously intensified his criticism of Powell and had refused to rule out the unprecedented possibility of firing him, causing market volatility.
On Monday, due to Trump's continued harsh criticism of Powell and threats of firing, US stocks, US bonds, and the US dollar all declined, creating a "triple kill" scenario, while gold and safe-haven currencies like the Swiss franc accelerated their rise, with gold reaching a new historical high.
After Trump's statement on Tuesday that he had no intention of firing Powell, the S&P 500 ETF rose 1.2% after hours, with Apple rising over 2.7%. Brent crude fell 1.02 USD per barrel within 5 minutes, trading at 66.74 USD per barrel. USD/CHF rose 0.0069 within 5 minutes, trading at 0.8198. The EUR/USD fell over 1.0% intraday, trading at 1.1365.
As the White House reported progress in trade negotiations to reduce the comprehensive tariffs announced earlier this month, US Treasury bonds and the US dollar showed greater stability on Tuesday. Although the 10-year bond yield remained almost unchanged, the 2-year yield rose to 3.82% due to weak auction demand.
According to a US Supreme Court ruling from 90 years ago, the president cannot fire Powell unless he can prove serious misconduct or improper behavior. Powell has repeatedly stated that the president has no right to remove him, and he will not leave before his term ends in 2026.
The White House also defended Trump's criticism of Powell earlier on Tuesday, stating that the president "has the right to express dissatisfaction with the Fed". Powell's analysis suggests that tariffs could lead to economic stagnation and higher inflation, which would limit the Fed's space for further rate cuts - a view that angered Trump.
