Trump eyes powell's 'termination' amidst rate cut clash
washington, Thursday, 17 April 2025.
President Trump has publicly suggested the ‘termination’ of Federal Reserve Chair Jerome Powell. This is due to ongoing disagreements over interest rate policies. Trump believes the Fed should aggressively lower rates, especially with the U.S. supposedly profiting from tariffs. Powell’s firm stance on the Fed’s independence is now under scrutiny. The president’s unprecedented call raises questions about the future of monetary policy. It also highlights the tension between political pressure and central bank autonomy. Powell’s current term is set to end in May 2026.
Market volatility spikes amid uncertainty
Trump’s renewed criticism and Powell’s cautious stance have injected volatility into the markets [5]. On April 16, 2025, the Dow Jones Industrial Average fell by 699.57 points, a 1.764 percent decrease, closing at 39,669.39 [5]. The Nasdaq experienced a sharper decline, dropping 516.01 points, or 3.164 percent, to close at 16,307.16 [5]. The S&P 500 Index also fell, losing 120.93 points, a 2.292 percent decrease, to close at 5,275.70 [5]. This market reaction reflects investor anxiety over potential policy shifts and economic instability [5].
Powell’s predicament and the fed’s dual mandate
Powell acknowledged the challenging situation the Fed faces due to Trump’s tariffs, which could lead to both higher inflation and lower growth [4]. The Fed’s dual mandate is to maximize employment and maintain price stability, targeting a 2 percent inflation rate [1]. Powell stated the Fed would await ‘clearer signals’ before adjusting interest rates [4]. He emphasized that ‘without price stability, we cannot achieve long periods of strong labor market conditions’ [3]. This stance indicates a potential conflict between the Fed’s goals and the administration’s policies [4].
Sector performance and investor sentiment
Technology stocks were particularly affected, with Nvidia’s stock price closing down 6.9 percent on April 16, 2025 [5]. The ‘fear index,’ VIX, surged back above 30, indicating heightened investor anxiety [5]. Gold prices experienced a significant surge, rising over $110, marking its strongest day since October 2023 [5]. This flight to safety underscores concerns about market stability and the potential impact of trade and monetary policy uncertainties [5]. The Bloomberg USD Index also fell to its lowest level since October 2024 [5].
Expert opinions diverge on fed’s next move
Wells Fargo’s Paul Christopher noted disappointment that Powell did not signal imminent rate cuts, despite discussing unemployment [5]. B Riley Wealth Management’s Art Hogan attributed the market sell-off to news regarding Nvidia and technology stocks, exacerbated by Powell’s statements [5]. Other Fed officials, like Christopher Waller, believe the impact of increased tariffs will be temporary [1]. However, some officials are more focused on fighting the effects of higher tariffs on inflation [1]. These differing views highlight the internal debate within the Fed regarding how to respond to the economic challenges [4].
Treasury yields and bond market reactions
The bond market is also reacting to the uncertainty [5]. On April 17, 2025, the U.S. 10 Year Treasury Note was at 4.294 percent [6]. Some reports suggest a ‘tariff shock’ in the bond market, reflecting concerns about trade-war stress on the economy [6]. Governor Christopher Waller warned that if Trump resumes steep duties, growth will slow significantly [3]. These factors contribute to investor caution and a reassessment of risk across various asset classes [6].