President Donald Trump’s attacks on Federal Reserve Chair Jerome Powell have caused alarm on Wall Street and among his own advisers. On Monday, US stock markets fell sharply as Trump called Powell “a major loser” for not lowering interest rates. The Dow ended the day down 2.5%, while the Nasdaq Composite and S&P 500 also dropped over 2%.
Trump has been pressuring Powell to lower rates to offset the impact of his administration’s tariffs. However, Powell has warned that the tariffs may lead to inflation and has emphasized the importance of the Fed’s independence from political influence. Last month, inflation was reported at 2.4%, although this figure does not account for the new tariffs.
The Fed aims for an inflation rate of 2% and carefully adjusts interest rates to control inflation while maximizing employment. Trump has hinted at firing Powell, whose term expires in May 2026, but it remains unclear if he has the authority to do so.
Trump urges market stability amid tensions
White House economic adviser Kevin Hassett told reporters that the administration “will continue to study” whether it can legally fire Powell. Despite the recent turmoil, Trump backed down from his aggressive stance on tariffs and removing Powell after warnings from advisers and CEOs about potential financial chaos and supply chain disruptions. This shift resulted in a rally on Wall Street, with the Dow, S&P 500, and Nasdaq all seeing significant gains.
Treasury Secretary Scott Bessent commented that it could take up to three years to rebalance trade between the US and China, while White House press secretary Karoline Leavitt stated that negotiations were progressing positively. Trump’s change in tone came after a private meeting with top executives from major retail companies, who delivered blunt messages about the detrimental effects of the trade war on supply chains and consumer markets. Despite the temporary reprieve, the economic environment remains uncertain, and Trump’s recent social media posts criticizing Powell and calling for lower interest rates have added to the unease.
Powell has reiterated that any decision to raise or lower rates will be made cautiously and without rushing. As trade negotiations continue, Trump expressed optimism about reaching a fair deal with China while suggesting that countries that have taken advantage of the US will face new terms. However, the long-term impact of his policies on the US economy remains to be seen, and market participants and business leaders continue to seek clarity and stability.
