Trump "changes his tune": No plans to fire Powell, now is the perfect time to cut interest rates

Author: Zhao Yuhe, Wall Street Journal

Previously, U.S. President Trump, who had criticized Federal Reserve Chairman Powell for not lowering interest rates quickly enough and even threatened to fire him, stated on Tuesday that although he remains dissatisfied with the Fed's failure to cut rates more swiftly, he has no intention of firing Powell.

When asked if he confirmed that he was not seeking to remove Powell from his position, Trump replied in the Oval Office, "Absolutely not, never."

"This is just media speculation. No, I have no intention of firing him. I just wish he would be more proactive about lowering interest rates."

"Would it be the end of the world if he doesn't? No. But now is indeed a suitable time. In any case, I have no intention of firing him."

However, Trump reiterated his criticism of Powell.

"We believe now is an excellent time to lower interest rates, and we hope our chairman will act sooner or on time, rather than lagging behind the situation."

In the days leading up to this, Trump had been pressuring Powell to cut rates. Just on Monday, Trump called Powell a "total loser" and suggested that the previous Fed rate cuts were intended to help former President Biden.

Last week, Trump stated that he couldn't wait to see Powell "be removed" and insisted 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 exploring whether he had the authority to fire Powell, following the president's repeated criticisms of the Fed on social media and in public speeches.

Additionally, before the European Central Bank lowered its benchmark interest 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 "complete failure" and stated, "If I wanted him out, he would be gone quickly," urging for an immediate rate cut, raising concerns about potential interference with the central bank's independence.

Trump's Change in Attitude Calms Market Sentiment, U.S. Stocks Rise After Hours

Analysts believe this statement aims to calm market tensions and marks a significant shift in Trump's attitude. Previously, he had intensified his criticism of Powell and had not ruled out the possibility of unprecedented actions to remove him, causing market turbulence.

On Monday, due to Trump's continued harsh criticism of Powell, even threatening to fire him, U.S. stocks, bonds, and the dollar all fell, resulting in a "triple whammy" for stocks, currencies, and bonds, while gold and safe-haven currencies like the Swiss franc surged, with gold prices hitting a new all-time high.

After Trump stated on Tuesday that he had no intention of firing Powell, the S&P 500 ETF rose 1.2% in after-hours trading, and Apple gained over 2.7%. Brent crude oil fell by $1.02 per barrel within five minutes, reporting at $66.74 per barrel. The dollar/Swiss franc rose by 0.0069 within five minutes, reporting at 0.8198. The euro/dollar fell more than 1.0% during the day, reporting at 1.1365.

As the White House indicated progress in trade negotiations aimed at reducing the comprehensive tariffs announced earlier this month, U.S. Treasury bonds and the dollar showed greater stability on Tuesday. Although the 10-year Treasury yield remained virtually unchanged, the 2-year yield rose to 3.82% due to weak auction demand.

According to a U.S. Supreme Court ruling from 90 years ago, the president has no authority to fire Powell unless he can prove serious misconduct or malfeasance by the federal official. Powell has repeatedly stated that the president does not have the authority to remove him, and he will not leave before the end of his term, which will conclude in 2026.

Earlier on Tuesday, the White House defended Trump's comments criticizing Powell, stating that the president "has the right to express dissatisfaction with the Federal Reserve." Powell's analysis suggests that tariffs could lead to stagnation in economic growth and higher inflation, which would limit the Fed's ability to cut rates further, a viewpoint that has angered Trump.