Trump intensifies attacks on Fed chair Powell, pushing for rate cuts as markets slide
President Donald Trump has sharply escalated his campaign against Federal Reserve Chairman Jerome Powell, publicly branding him a “major loser” and demanding immediate interest rate cuts to counter what he claims is a slowing US economy. The attacks, issued via multiple posts on Truth Social, have rattled investors and intensified debate over the Fed’s independence as markets reel from Trump’s renewed tariff threats.
“‘Preemptive Cuts’ in Interest Rates are being called for by many,” Trump wrote. “There is virtually no inflation… but there can be a SLOWING of the economy unless Mr. Too Late, a major loser, lowers interest rates, NOW.”
The outburst follows Powell’s recent remarks suggesting that Trump’s latest tariffs could stoke inflation and weigh on growth, complicating the central bank’s policy outlook. Speaking last week in Chicago, Powell warned that tariffs are “likely to move us further away from our goals,” and said the Fed was “well positioned to wait for greater clarity before considering any adjustments to our policy stance.”
Legal challenge brewing?
Trump’s increasingly aggressive rhetoric is not just aimed at policy. The president is also reportedly exploring whether he can legally fire Powell before the end of his term in May 2026. White House economic adviser Kevin Hassett confirmed Friday that the administration is studying the legal options.
Such a move would be unprecedented in modern US history. The Federal Reserve, established as an independent agency, is explicitly insulated from political pressure. Under current law, the Fed chair cannot be removed by the president without cause—a legal standard that has never been tested in court.
Powell, for his part, has remained composed, reiterating that the Fed’s independence is “a matter of law” and vowing to make decisions “strictly without consideration of political or any other extraneous factors.”
Still, a pending Supreme Court case on presidential power over independent agencies has raised fresh questions about whether Trump could assert broader authority to remove Powell.
Markets react with alarm
Equity markets sank sharply on Monday following Trump’s latest remarks. The Dow Jones Industrial Average dropped more than 1,000 points at its low, while the Nasdaq and S&P 500 both fell nearly 3%. Major tech stocks like Tesla and Nvidia lost over 5%. Simultaneously, the US dollar slumped to a three-year low and gold surged to a record high above US$3,400 an ounce, as investors fled to safe-haven assets.
Krishna Guha, vice chairman at Evercore ISI, warned that even the suggestion of removing Powell could destabilise financial markets. “You are raising the bar for the Federal Reserve to cut,” he said on CNBC. “If you actually did try to remove the Federal Reserve chairman, I think you would see a severe reaction in markets with yields higher, dollars lower and equities selling off.”
The ICE US Dollar Index fell as low as 97.92—its weakest level since early 2022—while yields on 10-year Treasuries ticked up to 4.37%, an unusual combination indicating eroding investor confidence in US institutions.
Inflation dispute at the centre
Trump’s call for rate cuts rests on his repeated claim that inflation is no longer a problem. “Energy Costs way down, food prices substantially lower… there is virtually No Inflation,” he wrote on Monday. But Fed officials and economic data tell a more complex story.
While inflation has fallen significantly from its June 2022 peak of 9%, it remains above the Fed’s 2% target. The most recent figures showed inflation at 2.4%, and Fed officials say Trump’s tariffs—rather than easing price pressures—are likely to rekindle them.
“Our obligation is to keep longer-term inflation expectations well-anchored,” Powell said last week. “A one-time increase in the price level must not become an ongoing inflation problem.”
The Fed’s dual mandate—to control inflation and maximise employment—means rate cuts must be weighed carefully. Lowering interest rates too soon could reignite inflation, while leaving them too high could dampen growth. Powell acknowledged this tension, saying “our tool only does one of those two things at the same time.”
The Fed’s next meeting is scheduled for 6–7 May.
