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US Stocks and Dollar Tumble as Trump Escalates Fed Criticism
US stocks and the dollar experienced a sharp decline as President Donald Trump intensified his verbal attacks on Federal Reserve Chairman Jerome Powell, labeling him a “major loser” for allegedly failing to lower interest rates. The renewed assault on the independence of the central bank rattled markets already on edge due to economic uncertainties.
Presidential Rebuke of Federal Reserve Chair
In a social media post, President Trump urged Federal Reserve chief Jerome Powell to implement “pre-emptive” reductions in interest rates to bolster the national economy. He asserted that Powell had consistently demonstrated a sluggish response to evolving economic conditions, suggesting a more proactive approach was necessary.
“There can be a SLOWING of the economy unless Mr. Too Late, a major loser, lowers interest rates, NOW,” the President stated in his online message, directly addressing and criticizing the Federal Reserve Chairman’s monetary policy stance.
Impact of Presidential Comments on Market Performance
President Trump’s censure of Powell’s economic stewardship occurs amidst concerns that the president’s tariff policies have precipitated a stock market sell-off, heightening anxieties about a potential economic recession. This ongoing feud between the executive branch and the head of the Federal Reserve, appointed by Trump during his initial term, has further contributed to market volatility.
Market Indices Respond Negatively
The S&P 500, an index reflecting the performance of 500 leading US companies, registered a substantial loss of approximately 2.4% on Monday. Year-to-date, the index has diminished by roughly 12% in value.
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The Dow Jones Industrial Average also suffered a significant downturn, dropping 2.5% and accumulating a year-to-date loss of about 10%. Similarly, the technology-heavy Nasdaq composite index experienced a decline exceeding 2.5%, marking an approximate 18% decrease since January.
Safe-Haven Assets Under Pressure
Despite typically being considered safe-haven assets during periods of market instability, both the dollar and US government bonds have been impacted by the recent turbulence, reflecting broad investor unease.
The dollar index, a measure of the dollar’s strength against a basket of major currencies including the Euro, plummeted to its lowest level since 2022 on Monday, signaling decreased investor confidence.
Concurrently, interest rates on US government debt experienced an increase, indicating that investors are demanding higher yields to compensate for the perceived risk of holding US Treasuries in the current economic climate.
History of Tension Between Trump and Powell
President Trump’s public criticism of Chairman Powell is not a new development, dating back to his first term in office. Reports from that time indicated that the president had even considered dismissing Powell. Since his re-election bid, Trump has consistently pressured Powell to implement lower borrowing costs as a measure to stimulate economic growth.
This latest wave of criticism follows Powell’s prior warnings that Trump’s import tariffs were likely to inflate prices for consumers and dampen overall economic activity. The divergence in economic perspectives has fueled ongoing tension between the two leaders.
Calls for Powell’s Dismissal
Last week, President Trump publicly advocated for Powell’s removal from office. In a social media post on Thursday, he stated, “Powell’s termination cannot come fast enough,” expressing his strong dissatisfaction with the Federal Reserve’s leadership.
However, any attempt to dismiss the Federal Reserve chairman would be highly contentious and potentially legally dubious, given the long-standing tradition of institutional independence afforded to the US central bank to ensure its operational autonomy from political pressures.
Chairman Powell himself addressed the issue last year, informing reporters that he did not believe the president possessed the legal authority to unilaterally remove him from his position, underscoring the complex legal and political dimensions of the situation.
White House Considers Options
Despite these legal and historical precedents, one of President Trump’s top economic advisors confirmed that administration officials were actively exploring the feasibility of removing Powell on Friday, the day the US stock market was closed for trading. This indicates a continued White House interest in potentially altering the leadership of the Federal Reserve, despite the inherent challenges and potential market repercussions.