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Donald Trump has said he has “no intention” of firing US Federal Reserve chair Jay Powell, after indications that he could sack him sparked a sell-off in markets.
The president has repeatedly hit out against the Fed chair’s refusal to cut interest rates and last week signalled he believed he could dismiss Powell before his term as central bank head comes to an end in May 2026.
Trump reiterated his complaints that the Fed needed to cut borrowing costs in comments in the Oval Office on Tuesday afternoon, but he added: “I don’t want to talk about that because I have no intention of firing him.”
The remarks came after intense speculation that Powell would soon be dismissed over his refusal to cut borrowing costs.
US stock futures rose, pointing to gains for the benchmark S&P 500 index and tech-heavy Nasdaq 100 later on Wednesday. The dollar index extended a recovery and is up 0.9 per cent since the start of Tuesday, while the Japanese yen dropped by the same amount, with one dollar buying ¥142.10. US bonds rallied, with yields on 10-year Treasuries falling 0.06 percentage points to 4.34 per cent while those on 30-year Treasuries dropped 0.08 percentage points to 4.80 per cent. Bond yields move inversely to prices.
In Asia, markets rose on Wednesday morning with Japan’s broad Topix gaining 2 per cent, Hong Kong’s Hang Seng 2.3 per cent and Taiwan’s benchmark 3.6 per cent.
Investors said the president’s apparent U-turn on Powell proved there were at least some members of his inner circle who recognised that markets value the independence of America’s major institutions.
“This shows there are some guardrails around this president,” said Dec Mullarkey, managing director at fund manager SLC Management. “This feels like [Treasury secretary Scott] Bessent’s touch,” he added.
“Clearly other folks have talked to [Trump] and explained that [firing Powell] would have caused huge volatility. Bessent recognises that the integrity of markets has to be maintained.”
Powell has repeatedly said that he would serve his full term as Fed chair and believed that his early dismissal would not be allowed under US law.
Investors’ concerns over his tenure rose after Kevin Hassett, director of the National Economic Council, said on Friday that Trump would “continue to study” the matter of dismissing Powell.
Hassett, then chair of the Council of Economic Advisers, backed Powell after the Fed chair and Trump fell out during his first term as president.
Financial markets sold off on Monday after Trump attacked Powell as “Mr Too Late” in a post on his Truth Social platform, with the dollar falling to a three-year low against a basket of currencies and the S&P 500 index dropping 2.4 per cent.
US stocks and the dollar largely recouped their losses during regular trading on Tuesday after Bessent said a trade war with China was “unsustainable”.
The Fed has been on a collision course with Trump since shortly after he took office, but the attacks from the White House have intensified ever since the president launched his “reciprocal tariffs” on April 2.
Rate-setters, including Powell, have made clear that they will postpone any interest rate cuts until they are confident that Trump’s trade policies will not lead to a persistent rise in inflation.
The Fed chair and his colleagues have also made clear their concerns that Trump’s tariffs raise the prospect of lower growth and higher prices, weakening an economy that officials previously said was in good shape.
Trump took to Truth Social last Thursday saying Powell’s termination “could not come fast enough” after the Fed chair confirmed the previous day that the central bank would not come to stock markets’ rescue and cut rates to counter fears that the tariffs will drive the US economy into recession.
Additional reporting from George Steer and Peter Wells in New York and Arjun Neil Alim in Hong Kong
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