In a surprising pivot, President Donald Trump has stated he has “no intention” of firing Jay Powell, the Chair of the US Federal Reserve. This announcement comes after days of escalating criticism directed at Powell from Trump regarding the Fed’s reluctance to cut interest rates.

Market Reactions

The president’s comments led to an immediate positive response in global financial markets. Futures for the S&P 500 rose by 2.5%, while the tech-heavy Nasdaq increased by 2.7%. European markets also saw gains, with the Stoxx Europe 600 rising by 1.8%, and Japan’s Topix climbing 2.1%.

In addition, the dollar index strengthened by 0.3%, rebounding from a recent three-year low. Meanwhile, US government bonds experienced a rally, with the 10-year yield decreasing by 0.04 percentage points to 4.35%. However, gold prices fell by 2% after reaching a record high of $3,500 per troy ounce on Tuesday.

Trump’s Critique of the Fed

Recently, Trump has been vocal about his dissatisfaction with Powell, criticizing the Fed’s decision to maintain higher interest rates. Last week, he suggested he might dismiss Powell before his term concludes in May 2026, which raised concerns about the Fed’s independence.

During a recent Oval Office meeting, Trump reiterated his desire for the Fed to reduce borrowing costs but reassured that he did not plan to discharge Powell, stating, “I don’t want to talk about that because I have no intention of firing him.”

Investor Sentiment

The president’s assurance not to remove Powell seemed to ease fears among investors, who value the independence of major institutions like the Federal Reserve. Dec Mullarkey, managing director at fund manager SLC Management, remarked, “This shows there are some guardrails around this president… Clearly other folks have talked to [Trump] and explained that [firing Powell] would have caused huge volatility.”

Regulatory Independence and Economic Policy

As concerns regarding Powell’s position grew following remarks from Kevin Hassett, the director of the National Economic Council, stating that Trump would “continue to study” the possibility of dismissing Powell, market confidence was shaken. Trump had previously labeled Powell as “Mr. Too Late” in a post, which drove financial markets down.

In an unrelated comment, the president suggested that the ongoing trade war with China was “unsustainable” and expressed optimism about striking a deal, promising significant reductions in tariffs. The Fed has indicated that it will hold off on considering interest rate cuts until there is confidence that Trump’s trade policies will not lead to persistent inflationary pressures.

Conclusion

The recent statements from Trump appear to reflect an understanding of the delicate balance between the presidency and the Federal Reserve. As Trump navigates economic pressures, the decision to maintain Powell at the helm of the Fed may signal a commitment to market stability in these tumultuous times.