In a significant reversal that brought immediate relief to global markets, US President Donald Trump stated on Tuesday that he has “no intention” of firing Federal Reserve Chair Jerome Powell, stepping back from days of heated criticism that had rattled investors worldwide.
JUST IN: 🇺🇸 President Donald Trump said he has no intentions to fire Fed Chair Jerome Powell. pic.twitter.com/mpiKtYmj9a
— Bitcoin Magazine (@BitcoinMagazine) April 22, 2025
“I have no intention of firing him,” Trump told reporters at the White House. “I just want him to be more active in lowering interest rates,” he added, maintaining his position that the Fed should cut rates but softening his approach toward its leadership.
The statement marks a dramatic shift from Trump’s recent rhetoric. Just days ago, the president had posted on social media that Powell’s “termination cannot come fast enough” and declared in the Oval Office last Thursday, “If I want him out, he’ll be out of there real fast, believe me. I’m not happy with him.”
Also Read: “His Termination Cannot Come Fast Enough”: Trump Escalates Feud With Fed Chair Powell
Markets responded immediately to the de-escalation. Wall Street equity futures jumped nearly 2% when trading resumed Tuesday evening, while Asian markets opened significantly higher on Wednesday morning. The S&P 500 climbed 2.5% on Tuesday, the Dow Jones Industrial Average surged 2.7%, and the Nasdaq gained 2.7% – more than making up for Monday’s losses that came in response to Trump’s earlier threats.
The Core Dispute: Interest Rates vs. Inflation
The tension between Trump and Powell centers on fundamental economic policy differences. Trump has consistently pushed for lower interest rates, arguing that inflation is no longer a significant concern.
“It’s all coming down,” Trump said, referring to prices. “The only thing that hasn’t come down, but hasn’t gone up much, are interest rates. And we think the Fed should lower the rate. We think that it’s a perfect time to lower the rate. And we’d like to see our chairman be early or on time, as opposed to late. Late’s not good.”
Powell, however, has maintained the Fed’s independence and has been cautious about further rate cuts. The Fed’s federal funds rate currently stands at approximately 4.33%, having been reduced by one percentage point since August as inflationary pressures appeared to ease.
The Fed chair has also been willing to challenge Trump’s trade policies directly. In a speech last week at the Economic Club of Chicago, Powell warned that Trump’s tariff policies would harm the US economy.
“The level of tariff increases announced so far is significantly larger than anticipated, and the same is likely to be true of the economic effects, which will include higher inflation and slower growth,” Powell said.
Market Reaction and Relief
Financial markets had reacted strongly to Trump’s earlier threats, with stocks, bonds, and the US dollar all dropping on Monday. Investors were concerned that interest rate policy might become subject to political pressure rather than being based on economic fundamentals.
Evercore ISI Vice Chairman Krishna Guha noted that Trump’s softened stance is “a clear positive” that “materially reduces the likelihood of worst-case outcomes including stagflation and the morphing of the tariff crisis into a sovereign debt crisis, though these risks remain.”
Wall Street participants are now hopeful that financial markets will continue to recover as Trump potentially negotiates deals with other countries to lower his tariffs.
In India, stock markets also opened higher on Wednesday, with the BSE Sensex rising 468.75 points (0.59%) to 80,064.34 and the NSE Nifty gaining 136.25 points (0.56%) to 24,303.50 at the start of trading.
Asian markets broadly showed gains, with Japan’s Nikkei 225 climbing 1.7%, Australia’s S&P/ASX 200 surging 1.6%, South Korea’s Kospi gaining 1.2%, and Hong Kong’s Hang Seng advancing 1.7%.
Legal Questions and Precedent
A key question in the dispute has been whether Trump has the legal authority to remove Powell from his position. While Trump has claimed he could fire Powell if he wanted to, many legal experts point to the Federal Reserve Act of 1913, which they believe does not grant the president such authority.
Powell’s term as Fed chair runs until May 2026, well into Trump’s current presidential term.
The situation echoes tensions from Trump’s first term as president, when he frequently criticized Powell after initially appointing him to lead the central bank. Trump was often frustrated by interest rate increases implemented under Powell’s leadership.
Global Economic Outlook
The conflict between Trump and Powell comes against a backdrop of growing global economic concerns. On Tuesday, the International Monetary Fund (IMF) lowered its forecast for global economic growth this year to 2.8%, down from its previous prediction of 3.3%.
The IMF also reduced India’s growth projection for fiscal year 2025-26 to 6.2% from the earlier estimate of 6.5%, citing “greater policy uncertainty, trade tensions, and a softer demand outlook.”
US Treasury Secretary Scott Bessent suggested on Tuesday that the ongoing tariff war with China is unsustainable and that de-escalation is expected. Trump himself indicated that while a deal with China could result in substantially lower tariffs on Chinese goods, they would still not be reduced to zero.
“It won’t be anywhere near” current tariff rates, Trump said, “but it won’t be zero.”
The Fed’s Independence
The confrontation has raised broader questions about the independence of the Federal Reserve, which has historically operated as an institution separate from direct political control.
Powell, who became Fed chair in 2018 after being nominated by Trump during his first term, has emphasized the importance of the central bank’s independence. The Federal Reserve’s mandate is to maintain price stability and maximum employment, not to respond to political pressure.
The potential undermining of Fed independence had been a major concern for investors during the recent tensions, as markets generally prefer monetary policy to be driven by economic data rather than political considerations.
Looking Ahead
While Trump has backed off from threats to remove Powell, the fundamental disagreement over interest rate policy remains. Trump continues to push for lower rates at a time when the Fed is being cautious about further cuts.
Powell’s term runs for another year, and the relationship between the White House and the Federal Reserve will likely remain a focus for markets moving forward.
For now, investors appear relieved that the immediate threat to Fed leadership has been removed, allowing markets to stabilize after a period of uncertainty. However, analysts caution that if Trump’s promised trade deals don’t materialize soon, economic growth could still be at risk, with some strategists warning of a potential recession.
As the conflict between fiscal and monetary policy continues to evolve, global markets will be watching closely for further developments in the relationship between Trump and Powell, which remains one of the key dynamics shaping the economic landscape.
Want real-time updates on Bitcoin, Ethereum, and blockchain trends? Crypto News Today delivers breaking crypto news, expert insights, and price movements to keep you informed.
