Trump confirms no plans to fire US central bank chief, market reacts positively

President Donald Trump clarified on Tuesday that he has no plans to fire Federal Reserve Chair Jerome Powell, despite weeks of criticism over the Fed’s reluctance to cut interest rates further.

"I have no intention of firing him," Trump stated during a meeting with reporters in the Oval Office. He added, "I would like to see him be a little more active in terms of lowering interest rates."

The statement provided immediate relief to Wall Street, with equity index futures surging nearly 2 percent as trading resumed on Tuesday evening. The market had been rattled on Monday following Trump’s repeated attacks on Powell for not cutting rates more aggressively since he returned to office in January.

Trump also discussed the ongoing trade negotiations with China, expressing optimism that a trade deal could lead to "substantially" lower tariffs on Chinese goods. While he said the tariffs would decrease, he also noted they would not be eliminated entirely.

The tense relationship between Trump and Powell has unsettled investors, particularly given the harsh language Trump has used, including calling Powell "a major loser" and saying Powell's firing "cannot come fast enough." These comments raised concerns in the financial markets, as the independence of the Federal Reserve is seen as essential for global financial stability.

Although Trump reassured the public that he has no plans to remove Powell, his criticism of the Fed's rate policy remains pointed. "We think 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.

This tension with Powell dates back to Trump’s first term. After appointing Powell as Fed Chair, Trump became frustrated with the central bank's rate hikes and openly considered removing him from office. Legal experts argue that the Federal Reserve Act of 1913 limits the president’s ability to remove Powell, only allowing his dismissal for "cause"—usually misconduct, not policy disagreements.

Despite his past rhetoric, Trump’s comments on Tuesday suggest that his administration is not currently planning to fire Powell. However, the criticism of the Fed’s monetary policy continues to pose challenges to the central bank’s independence.

The Fed has kept interest rates steady since Trump’s return to office, and its next policy meeting is scheduled for two weeks from now. The central bank must balance the effects of Trump’s tariffs, which could stoke inflation and slow economic growth.

In response to Trump’s remarks, futures traders lowered expectations for rate cuts, now pricing in three quarter-point reductions by the end of the year, down from previous predictions of four.

While US employment and retail sales data remain strong, economists are warning that downside risks are increasing as the impact of tariffs continues to ripple through the economy.

The International Monetary Fund (IMF) recently downgraded its growth outlook for both the US and the global economy, citing Trump’s tariffs as a major factor behind the revision.