Powell Threatened to be Fired

Wednesday morning was interrupted by headlines stating that President Trump was planning to fire Federal Reserve Chair Jerome Powell, who is due to hold his position until May 2026. He had discussed it with members of Congress on Tuesday and showed them the letter he planned to send, as confirmed by a White House Official. He then confirmed it to reporters in the Oval Office, asking about the concept of firing him, stating that many House Republicans agreed. This occurred after a blocked procedural vote that would have advanced cryptocurrency legislation in the House. The idea of a president firing a Fed chair is legally untested, as the law states the chair can only be fired “for cause”.

This had an immediate effect on the markets. The dollar index dropped sharply, losing all progress of the previous 3 days. The S&P also fell by 0.5%. The rebounded after Trump told reporters in the Oval Office that he wasn’t planning to do this. He didn’t fully rule out a firing, and called Powell a “knucklehead”, but said it was unlikely for now.

From this, we can see that traders didn’t want the prospect of Powell being dismissed. But the varying reaction of different assets amplifies the year’s market dynamics. Stocks regained all losses and ended at a high, with two-year yields descending to lows, leaving the yield curve steeper than it had started, and the dollar, which had seen recent improvement, sustained some damage.