The dollar plunged after reports suggested Trump would attempt to dismiss the Fed chair this week
President Trump said Wednesday he wasn’t planning on firing Jerome Powell after financial markets reeled on the back of reports that he would try to remove the Federal Reserve chair from his post.
Multiple outlets indicated the president raised the possibility of firing Powell during a discussion with Republican lawmakers Tuesday, with the New York Times suggesting he had drafted a letter to dismiss the Fed chair and had shown it in that meeting.
But speaking to reporters at the White House Wednesday, Trump said his administration was “very concerned” about Powell but not “planning on doing anything” after the dollar nosedived in response to the rumors.
The S&P 500 also plummeted as speculation about Powell’s future gathered pace but recovered after Trump appeared to rule out dismissing the Fed chief, while the yield gap between five- and 30-year Treasuries stretched to a level not seen since 2021.
Trump and his administration have ramped up their rhetoric in recent weeks against Powell, appointed as Fed chair during Trump’s first presidency in 2018.
On Wednesday, Trump said the Fed’s decision to keep interest rates elevated instead of cutting in recent months was harming the mortgage market.
“It does hurt people wanting to get a mortgage, people want to buy a house… He’s a terrible Fed chair,” Trump said.
The Fed has kept rates on hold this year, partly because of the tariff war launched by Trump at the beginning of April, as it waits to see whether upward pressure on inflation could emerge.
The consumer price index (CPI) increased to 2.7% last month, new government data showed yesterday, effectively ending chances of a July rate cut and seeing markets pare back expectations for a September reduction.
The central bank’s refusal to consider lowering rates has drawn the ire of Trump and his allies. Vice president JD Vance and Federal Housing Finance Agency (FHFA) director Bill Pulte are among the members of Trump’s administration to lambast the Fed’s approach to rates in recent weeks.
Powell has said a president doesn’t have the power to remove the Fed chair, while the US Supreme Court also reinforced the idea of the Fed’s independence earlier this year.
But Trump came close to attempting to remove Powell this week, a senior White House official told CNN.
“The president asked lawmakers how they felt about firing the Fed chair,” the official told the outlet. “They expressed approval for firing him. The president indicated he likely will soon.”
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