President Donald Trump’s recent attacks on Federal Reserve Chair Jerome Powell caused alarm among some of his top advisers, who warned him that any attempt to remove the head of the central bank could cause as much market turmoil as his ongoing trade war, according to people familiar with the conversations. The warnings — and the markets’ own volatility this week – seemed to have broken through. Trump backed off his threats to try removing Powell from the job on Tuesday, telling reporters in the Oval Office: “I have no intention to fire him.” That prompted sighs of relief on Wall Street. A day after markets boomed on comments from Treasury Secretary Scott Bessent that Trump would seek to de-escalate the trade war with China, markets were again set to surge. Dow futures shot 750 points higher, or 1.9% Wednesday. S&P 500 futures were up 2.6% and Nasdaq futures rose 3%. Investors bought US Treasury bonds again, sending the benchmark 10-year yield, which trades in opposite direction to prices, down sharply to 4.3%. Top administration officials were also relieved by Trump’s Oval Office statement on Powell. They had become unnerved by the heated rhetoric and wary of a prolonged legal battle should Trump attempt to unseat the Fed chair. Many Trump advisers did not ultimately believe the president would attempt to fire Powell, given the warnings he’d been receiving from his economic team — including Bessent – stretching back several months. Trump had seemed to absorb the notes of caution. But his amped-up rhetoric over the past week had caused fresh uncertainty about his intentions — in particular, his message on social media Thursday that Powell’s “termination cannot come fast enough!” and his follow-up Monday calling Powell a “major loser.” Trump has argued that the Fed should cut rates soon to speed up the economy, perhaps as a way to counteract the significant economic drag that his massive tariffs are expected to create. But Powell has said repeatedly the Fed will only make a decision to raise or lower rates after carefully consideration and would not rush a decision or issue an emergency rate cut before the rate-setting committee’s next scheduled meeting in May. White House Press Secretary Karoline Leavitt continued Trump’s line of attack Tuesday in a press briefing, in which she defended the president for criticizing the Fed. She suggested that the Fed’s action to lower rates in the late stages of the Biden administration – but not (yet) under Trump – could be political. There is no evidence the independent Fed is taking a political stance, and Powell has vehemently and repeatedly denied suggestions that the Fed plays politics when making its monetary policy decisions. “The president believes they have been making moves and taking action in the name of politics rather than the name of what’s right for the American economy,” Leavitt said prior to Trump’s Oval Office comments. “The president has the right to express his displeasure with the Fed and he has the right to say he believes interest rates should be lower.” Trump’s top economic adviser Kevin Hassett also told reporters the White House was studying whether Trump could fire Powell, and said a potential “new legal analysis” might ease market concerns. That represented a break from Hassett’s prior comments in support of the central bank’s independence. White House Press Secretary Karoline Leavitt said Tuesday that Hassett had recently changed his mind on the Fed after Powell insisted the central bank wouldn’t rush a decision to cut rates. “I also spoke to Kevin Hassett about the Fed as well and he has called into question the Fed’s independence and whether they are actually doing things out of the best interest of the economy or are they doing it for partisan reasons,” she said. But White House officials had long determined that firing Powell would spark legal challenges and market tumult. And if any study was actually underway, Trump suggested Tuesday it wasn’t necessary. He said in the Oval Office he “never did” have any intention of removing Powell from the job.
Trump was warned of financial turmoil if he fired Powell. Now, his U-turn has stocks roaring higher
TruthLens AI Suggested Headline:
"Trump Reassures Markets by Confirming Support for Federal Reserve Chair Powell"
CNN
7.4
TruthLens AI Summary
President Donald Trump's recent criticism of Federal Reserve Chair Jerome Powell raised concerns among his advisers about potential market instability if he pursued the option of firing Powell. According to sources familiar with the discussions, senior aides cautioned Trump that such a move could result in market chaos comparable to the turmoil caused by his ongoing trade war with China. Responding to these warnings and the market's volatility, Trump publicly stated his intention to retain Powell, declaring, "I have no intention to fire him," during a press conference in the Oval Office. This announcement prompted a significant positive reaction from Wall Street, with Dow futures rising by 750 points, or 1.9%, and S&P 500 futures increasing by 2.6%. The bond market also responded favorably, evidenced by a sharp decline in the benchmark 10-year Treasury yield, indicating renewed investor confidence.
In the lead-up to Trump's reassurance, his rhetoric had escalated, including a social media post where he described Powell as a "major loser" and suggested that Powell's termination was urgent. Despite Trump's frustrations, Powell maintained that any decisions regarding interest rates would be made cautiously and not rushed. White House Press Secretary Karoline Leavitt defended Trump's criticisms, suggesting that Powell's actions might be politically motivated. However, there remains no evidence to support claims of political influence on the Fed's decisions. Trump's economic adviser, Kevin Hassett, had previously supported the Fed's independence but later indicated that the administration was exploring possible legal avenues regarding Powell's potential removal. Ultimately, White House officials had long recognized that attempting to fire Powell would likely lead to legal challenges and market disruption, a consideration that seems to have influenced Trump's decision not to pursue this course of action.
TruthLens AI Analysis
The article presents a significant moment in the interplay between politics and economics, particularly how President Trump’s rhetoric regarding Federal Reserve Chair Jerome Powell has influenced market dynamics.
The narrative highlights the concerns of Trump's advisers regarding the potential fallout from his threats to remove Powell. This reflects an awareness among economic stakeholders about the fragility of market confidence in the context of ongoing trade tensions and monetary policy. The abrupt shift in Trump’s position, from threatening to fire Powell to affirming his intention to retain him, illustrates a response to market volatility and adviser warnings, suggesting that political decisions are increasingly being shaped by economic realities.
Market Reactions and Investor Sentiment
Following Trump's statement that he would not fire Powell, there was a notable surge in stock market futures, indicating a positive reaction from investors who were relieved by this clarification. This uptick in market sentiment underscores the essential role that central bank leadership plays in maintaining economic stability. The article suggests that the intertwining of political rhetoric and market confidence can lead to immediate and substantial impacts on financial markets.
Political Implications and Administration Dynamics
The piece also sheds light on the internal dynamics within the Trump administration, revealing a tension between the President’s personal views and the cautions expressed by his economic team. The advisers’ apprehensions about a potential legal battle further complicate the political landscape, suggesting that maintaining Powell’s position is essential not only for economic reasons but also to avoid unnecessary political strife.
Public Perception and Messaging
There is a clear intention to shape public perception regarding the stability of economic leadership. By framing the decision to keep Powell as a positive outcome, the article aims to reassure the public and investors about the continuity of monetary policy amidst trade disputes. This effort to create a narrative of stability could be pivotal in maintaining consumer confidence and mitigating fears of economic downturns.
Manipulative Elements and Overall Reliability
The article appears to be somewhat manipulative in its presentation, as it emphasizes the potential chaos that could arise from Trump's actions while downplaying the underlying economic challenges represented by the trade war. The language used suggests a need to protect the image of the administration and the Fed, possibly glossing over more complex economic realities that may not align with the positive spin being presented.
In terms of reliability, the article is grounded in factual reporting but may reflect bias in how it frames the implications of Trump's actions and the responses from the market. The emphasis on the market's positive reaction post-announcement could lead readers to overlook broader economic concerns that remain unresolved.
Considering these insights, the article serves to reassure the public about the stability of leadership in the face of political upheaval, while also revealing the complexities of how economic policies are influenced by political considerations.