In a surprising turn of events, U.S. President Donald Trump has backed off his earlier threat to remove Federal Reserve Chair Jerome Powell, a move that caused market jitters last week. Speaking to reporters on Tuesday, Trump dismissed speculation about Powell’s imminent firing, stating, “I have no intention of firing him.” He acknowledged, however, that he would prefer Powell to act more aggressively in lowering interest rates, which Trump believes could boost the economy.
The announcement calmed the markets, which had been reacting negatively to Trump’s prior comments. U.S. stock futures surged after his remarks, with contracts linked to major indices like the S&P 500 and Nasdaq jumping by more than 1.7% and 1.9%, respectively. The U.S. dollar also saw a notable rise, climbing over 1% against other major currencies.
Earlier on Tuesday, Wall Street had rallied after U.S. Treasury Secretary Scott Bessent’s comments suggesting that the ongoing trade war with China was “unsustainable” and that a deal between the two nations could be on the horizon. Bessent’s remarks, alongside White House Press Secretary Karoline Leavitt’s statement about the administration making progress toward a deal, seemed to reassure investors.
The optimism continued throughout the day, with the S&P 500 closing up more than 2.5%, and the Nasdaq finishing 2.7% higher. Asian markets also opened on a positive note, with Japan’s Nikkei 225 and South Korea’s KOSPI gaining 2% and 1%, respectively.
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Trump’s recent escalation of trade tensions with China, which included imposing hefty tariffs, has caused significant uncertainty. The U.S. imposed a 145% tariff on most Chinese goods, while China retaliated with its own 125% tariff on U.S. exports. However, Trump recently admitted that the tariffs on China were “very high” and signaled that the rate would likely come down “substantially.”
Despite his shifting stance on Powell, Trump’s repeated attacks on the Fed have unsettled the financial community. Markets dropped sharply on Monday after Trump labeled Powell a “major loser” for not moving faster on interest rate cuts. Critics argue that undermining the independence of the Federal Reserve could have disastrous consequences for the economy.
For now, Powell remains in his position, having previously stated that he would not resign even if asked. The Federal Reserve’s independence is seen by many economists as crucial to maintaining stability in the U.S. economy. Any attempt to remove Powell would likely have significant repercussions, including potential market chaos.
Trump’s policy on interest rates and trade will likely continue to be a topic of debate, but for now, investors are taking a breather with the news of Powell’s continued leadership at the Fed.
