Trump's Threat To Fire Powell Could Shake US Financial Markets

President Donald Trump's potential attempt to dismiss Federal Reserve Chair Jerome Powell could rattle U.S. financial markets and undermine central bank independence, investment strategists warn.

What Happened: Trump’s aggressive stance on tariffs has already caused turbulence in the financial markets.

Investment strategists have now warned against dismissing the possibility of Trump trying to remove Powell from the Fed.

Kathy Jones, chief fixed-income strategist at the Schwab Center for Financial Research, stated that Trump’s desire to fire Powell and lower interest rates is evident, according to a report by MarketWatch.

Trump has publicly criticized Powell for refusing to lower interest rates, demanding that the central bank follow the European Central Bank’s example, which announced its latest rate cut on Thursday.

Despite Trump’s threats, Powell has maintained that the Fed will wait to see how Trump’s tariffs impact the economy and inflation before proceeding with further interest-rate cuts. He also stated that the Fed would not intervene if the stock market plummeted.

See Also: China Slashes US Oil Imports By 90% Amid Trump Tariffs, Turns To Canada Instead

Following Trump’s social media post criticizing Powell, several press reports cited White House officials stating that Trump was not actually planning to fire Powell. However, the authority Trump has to dismiss Powell remains unclear.

Analysts have warned that an upcoming Supreme Court decision could potentially undermine the independence of the Fed and other government agencies by expanding presidential powers. This could allow firings at institutions previously considered insulated from political pressure.

Despite the uncertainty, investors seemed willing to give Trump the benefit of the doubt, with the S&P 500 index finishing slightly higher after a rocky session ahead of the long holiday weekend.

Why It Matters: The potential dismissal of Powell by Trump has been a topic of discussion since Trump’s re-election.

In November, Powell dismissed speculation about his potential resignation or removal upon Trump’s return to the White House, stating the president cannot legally fire the central banker.

However, Trump later said he had no immediate plans to remove Powell.

Despite this, Trump’s criticism of Powell’s handling of interest rates has continued, leading to speculation about a potential clash between the White House and the central bank.

This ongoing tension, coupled with the lack of a perceived “Trump put” or “Fed put”, could trigger a swift and significant market downturn.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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