US President Donald Trump says he has no intention of firing Jerome Powell, the current Chairman of the Federal Reserve, despite ongoing public criticism of Powell’s reluctance to cut interest rates. Speaking from the Oval Office, Trump emphasized that although he won’t dismiss Powell, he expects the Fed to be “a little more active” in supporting the economy by reducing rates.
This comes after a week of heightened tensions, where the president labeled Powell as “a major loser,” a remark that initially rattled the financial markets, sending stocks, bonds, and the dollar into a downward spiral. However, markets have since begun a recovery, buoyed in part by Trump’s reassurance and renewed optimism on the trade front.
Fed Policy Under Pressure
Despite the Fed having slashed interest rates by a full percentage point late last year, it has so far resisted further cuts in the current fiscal year. Trump has not hidden his frustration with the Fed’s stance, believing that more aggressive cuts are necessary to stimulate the US economy, especially amid ongoing trade conflicts.
The issue gained more traction last Friday when National Economic Council Director Kevin Hassett revealed that Trump had asked about the legal possibility of removing Powell from office. While that move seems unlikely for now, it highlights the level of pressure the White House is placing on the traditionally independent Federal Reserve.
Trade Talk Optimism
Beyond monetary policy, Trump used his Oval Office remarks to signal a softer tone towards China. He stated he would be “very nice” in ongoing negotiations, suggesting that while tariffs may not drop to zero, there could be reductions if a deal is struck. This sentiment was echoed by US Treasury Secretary Scott Bessent, who called the current trade standoff “unsustainable” and predicted an eventual de-escalation.
These signals of thawing relations were enough to lift global markets. On Wednesday morning, Asia’s key indices were up—Japan’s Nikkei 225 by 1.9%, Hong Kong’s Hang Seng by 2.4%, and China’s Shanghai Composite by 0.1%. US stock futures also moved higher, with Tuesday’s trading session seeing a 2.5% rise in the S&P 500 and a 2.7% increase in the Nasdaq.
Economic Risks and Global Impact
While markets may be stabilizing for now, there are broader concerns. Investors fear that combining lower interest rates with rising tariffs could overheat prices, stoking inflation. Meanwhile, uncertainty continues to cloud the global economic outlook.
The International Monetary Fund (IMF) recently issued a stark warning, downgrading the US economic growth forecast more than any other advanced economy. The IMF pointed directly to trade uncertainty and tariffs as the key drivers behind this expected slowdown. They also warned that the rapid rise in protectionism could trigger a “significant slowdown” in global growth.
