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.(Reuters)
