📉 Markets shudder after Trump questions Powell's future
The U.S. dollar and stocks tumbled Wednesday after President Trump openly asked lawmakers if he should oust Federal Reserve Chair Jay Powell, igniting concerns over the central bank's independence.
Why it matters: The mere suggestion that a president might fire a Fed chair over policy disagreements strikes at the heart of the central bank's political independence, a pillar of U.S. economic stability. Investors are now pricing in a future where the Fed might bow to political pressure.
What we're watching:
The meeting: In an Oval Office meeting late Tuesday, Trump asked Republican members of Congress if he should remove the Fed chair.
The reaction: A White House official said the lawmakers were supportive of the idea.
The fallout: The dollar fell sharply by 0.9% against other major currencies, and U.S. stocks dropped to a two-week low.
"Traders bet that Powell's potential replacement would bow to political pressure and cut interest rates faster than expected under the current regime."
Be smart: While Florida congresswoman Anna Paulina Luna posted on X that a firing was "imminent", a White House official disputed that the chair would be removed imminently.
The bottom line: The market's reaction is a clear signal. Even the threat to Fed independence is enough for investors to sell off U.S. assets. The question has been planted, creating significant uncertainty for the economy.