By Reuters
WASHINGTON, April 22 (Reuters) – President Donald Trump on Tuesday backed off from threats to fire Federal Reserve Chair Jerome Powell after days of intensifying criticisms of the central bank chief for not cutting interest rates.
“I have no intention of firing him,” Trump told reporters in the Oval Office on Tuesday. “I would like to see him be a little more active in terms of his idea to lower interest rates,” he added.
The de-escalation drew an immediate thumbs up from Wall Street, as equity index futures jumped by nearly 2% on the resumption of trading on Tuesday evening. Stocks, bonds and the U.S. dollar had all slumped on Monday after Trump over the Easter holiday weekend repeatedly attacked Powell for not cutting interest rates further since the president resumed office in January.
“Whether this reflects Monday’s brutal foretaste of what would happen in markets if he did try to fire Powell, or was the plan all along, it is a clear positive,” wrote Evercore ISI Vice Chairman Krishna Guha. “It 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.”
Also during his question-and-answer volley with reporters on Tuesday, Trump expressed optimism that a trade deal with China could “substantially” cut tariffs, which also provided a boost for investors. He said a deal would result in “substantially” lower tariffs on Chinese goods, suggesting that a final deal will not “be anywhere near” current tariff rates. But “it won’t be zero,” he added.
Advertisement · Scroll to continue
Sponsored by Advertising Partner
Sponsored Video
Watch to learn more
Learn more
The combination of the rocky rollout of Trump’s tariffs and, more recently, his repeated barbs at Powell and the Fed had rattled investors and intensified selling of U.S. assets including stocks, U.S. Treasuries and the dollar.
Trump’s broadsides were often accompanied by threatening remarks, such as last week’s social media posting that Powell’s termination as Fed chair “cannot come fast enough” and more personal jabs, such as calling Powell “a major loser.” The threats spooked financial markets that view the Fed’s independence as critical to underpinning its credibility as the world’s most influential central bank and a cornerstone of global financial stability.
But while Trump seems to have set aside those threats for now, his criticisms of Fed rate policy remain just as pointed.
“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,” Trump said.
