Trump's Fed attacks rattle markets: dollar dips to 2022 low

2025-04-22 general

washington, Tuesday, 22 April 2025.
Former President Trump’s renewed public attacks on Federal Reserve Chair Jerome Powell are causing significant market turmoil. The S&P 500 fell 2.4% and the dollar hit its lowest mark since 2022. Trump, who has publicly called for Powell to be fired, insists on immediate interest rate cuts. Experts warn of a ‘severe’ market reaction if Trump attempts to remove Powell, while the administration is reportedly studying options to do so. Markets fear Trump may try to undo the Fed’s protection against political interference.

Broader market impact

The market’s reaction to Trump’s statements has been broad. On Monday, the Dow Jones Industrial Average fell nearly 2% in the first hour of trading [4]. The Nasdaq also experienced a significant drop, declining by 2.6% [4]. The S&P 500 closed down 2.4% [1][5]. The Nasdaq fell over 2.5%, and the Dow Jones Industrial Average lost almost 1,000 points, a 2.5% decrease [5]. The dollar’s decline also reflects investor anxiety, reaching its lowest level since 2022 [3][4].

Expert opinions on fed independence

Experts are expressing concerns about the long-term effects of Trump’s actions on the Federal Reserve’s independence. Christopher Meissner, a professor of economics at the University of California, Davis, stated that central bank independence is crucial for financial stability and low inflation [3]. Austan Goolsbee, president of the Federal Reserve Bank of Chicago, warned that undermining the central bank’s independence would have negative economic ramifications [7]. He stated that interference would lead to higher inflation, worse growth, and higher unemployment [7].

Gold prices surge amidst uncertainty

Amidst the turmoil in the stock and currency markets, gold prices have surged to record highs [4]. On April 14, 2025, spot gold crossed the $3,400 per ounce mark for the first time [3]. This increase reflects investors’ flight to safety during times of economic and political uncertainty [GPT]. The rise in gold prices suggests a lack of confidence in traditional assets and a search for more secure investments [GPT].

Potential for further market declines

The potential removal of Powell is a significant concern for investors. Krishna Guha, Evercore ISI’s vice chairman, anticipates a ‘severe reaction’ in the markets if Trump attempts to fire Powell [2][4]. Guha believes such an action would lead to higher yields, a lower dollar, and a sell-off of equities [4]. Mark Zandi, chief economist of Moody’s Analytics, echoed this concern, stating that bond investors would react negatively to the impairment of the Fed’s independence, potentially causing long-term interest rates to skyrocket [5].

Asian markets respond

The impact of Trump’s actions is not limited to the United States. Asian markets also reacted negatively [7]. On Tuesday, April 22, 2025, Japan’s Nikkei 225, Hong Kong’s Hang Seng Index and Taiwan’s TAIEX were all down [3][7]. These declines indicate that the uncertainty surrounding the Fed and the US economy is having a global impact [GPT]. Investors worldwide are closely monitoring the situation and adjusting their portfolios accordingly [GPT].

Bronnen

economic policy market reaction