After his broadsides against the head of the US Federal Reserve caused a decline in the dollar and the stock market, US President Donald Trump retaliated and threatened to fire him.
Trump’s comments on Tuesday appeared to rule out any plans to sack US Reserve Chairman Jerome Powell, who has been repeatedly criticized for slowing interest rates.
The press “flourishes” with the news. Trump told reporters at the White House, “I don’t intend to fire him.”
In terms of his plan to lower interest rates, I would like to see him be a little more active. The ideal moment to lower interest rates is now. Is that the end, if he doesn’t? No, it’s not”.
Following Trump’s comments, US stock futures increased significantly, with contracts tied to the benchmark S&, P 500, and tech-heavy Nasdaq-100 rising more than 1. 70% and 1.90 percent, respectively.
In comparison to other major currencies, the US dollar increased by more than 1%.
After US Treasury Secretary Scott Bessent stated in an investor conference that a trade war with China was “unsustainable,” Wall Street reacted with optimism and predicted a resolution at some point.
White House Press Secretary Karoline Leavitt said the Trump administration was “setting the stage for a deal with China” and “doing very well” in reaching an agreement in response to Bessent’s remarks.
The S&, P 500 and Nasdaq both ended up more than 2.5 percent ahead, while the other half came in at more than 2.7 percent.
Early on Wednesday, Asian markets rose, with the Nikkei 225 index from Japan and the Koreas’ KOSPI index rising by about 2 and 1 percent, respectively.
After Trump imposed a 145 percent tariff on the majority of Chinese goods and imposed a 125 percent duty on US exports in retaliation, the US and China are locked in a successful trade embargo.
Trump stated on Tuesday that the tariff on China would “come down significantly” and that it was “very high.”
Given that the Federal Reserve’s independence is a key factor in maintaining the US economy, Trump’s repeated attacks on Powell have unnerved financial markets.
After Trump called Powell a “major loser” and “Mr. Too Late,” Wall Street experienced some of its steepest losses of the year on Monday, where it lost money despite opposing cuts to the benchmark interest rate, which affects borrowing costs across the economy.
Trump made the comments after he claimed last week that Powell’s dismissal “cannot come quickly enough” and that his top economic adviser, Kevin Hassett, had been considering his possible removal.
In light of fears that Trump’s massive tariffs will spark inflation, the Federal Reserve, which last cut the benchmark rate in December, has expressed caution about lowering borrowing costs in the near future.
Contrary to what most economists believe, Trump has refuted concerns that his trade war will cause prices to go up, and he argued that the central bank’s cautious stance could lead to a slowdown in the economy.
Former US President Joe Biden appointed Powell to a four-year term that he had been nominated for in 2017. He has stated that he can only be fired for malfeasance and that he would not resign if asked.
The US Supreme Court has established that independent federal agencies’ heads can only be removed for “cause,” as per US Supreme Court precedent, despite the Trump administration’s lawsuit in court involving the Merit Systems Protection Board and the National Labor Relations Board.
Given the long-held belief that the Federal Reserve should make its decisions without regard to politics, any decision to remove Powell before his term is over is likely to shock the financial markets.
According to Erasmus Kersting, an economics professor at Villanova University in Villanova, Pennsylvania, “I would anticipate a significant decline in the stock and bond markets.”
Source: Aljazeera
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