Rumor has it that Powell will be fired, and Trump's contradictory statements have exacerbated market anxiety
2025-07-17 00:35:24
On Wednesday (July 16) during the U.S. trading session, there were reports that President Trump denied plans to fire Powell. Trump said "we have no plans to take any action" and refuted reports that a letter to fire Powell had been drafted. However, he made it clear that he hoped the position of Fed chairman would be held by "someone who supports low interest rates" and nominated Kevin Hassett, director of the White House National Economic Council, as a potential candidate, saying that "many people" are vying for the position. Sources revealed that Trump has not ruled out the possibility of firing Powell and has consulted Republican lawmakers and received "positive feedback."
Reflecting investor uneasiness, the CBOE Volatility Index, or VIX, the “fear index,” surged, the dollar weakened and stocks fell.
Trump's latest stance: Conflicting signals to Powell
In his remarks at Joint Base Andrews, reported by Reuters and Bloomberg, Trump denied any intention to fire Powell, saying "we have no plans to do anything" and dismissing suggestions that a letter to fire the Fed chairman had been drafted.
At the same time, he expressed dissatisfaction with the Fed's high interest rate stance, emphasizing that he prefers to be led by "people who support low interest rates" and made it clear that he is "only interested in 'low interest rate people' as Fed chairman." Trump also mentioned Kevin Hassett as a possible candidate for Fed chairman, but he said that another competitor, Treasury Secretary Scott Bessant, may continue to hold his current position because of his excellent work.
Although Trump publicly denied it, Reuters quoted sources as saying that he was still considering firing Powell and had sought the opinions of Republican lawmakers, and the positive response from lawmakers sparked speculation that he would take action soon. Trump said, "Republicans are pushing for the dismissal of Powell, and my position is more conservative."
Bloomberg reported that a White House official said Trump would "probably" fire Powell "soon," further adding to market uncertainty. Trump said, "(about not firing Powell) unless there is fraud in the renovation process."
The emergence of these contradictory signals stems from the latest remarks of Florida Congresswoman Ana Paulina Luna, who said that after meeting with Republican lawmakers on July 15, she was "99% sure" that Trump would take action to fire Powell. The contradiction between Trump's public denial and private consideration of firing reported by Reuters has exacerbated market volatility, and the VIX index has risen sharply, reflecting investors' concerns about the damage to the stability of the Federal Reserve.
Market sources said that U.S. congressmen canceled their dinner with Federal Reserve Chairman Powell. This change further triggered market speculation about Powell's situation and the continuity of the Fed's policies.
Fed policy: rate cut probability and tariff tensions
The Chicago Mercantile Exchange (CME) "FedWatch" tool shows that the probability of maintaining the interest rate in the range of 4.25%-4.5% in July is 95.3%, the probability of a 25 basis point rate cut in September is 64.9%, and the probability of a 50 basis point rate cut is 3.1%. This probability has increased from 60% last week, reflecting the weakening inflation data: the producer price index (PPI) in June was flat month-on-month (expected to be 0.2%), and the core PPI was 0.0% month-on-month and 2.6% year-on-year, both lower than expected.
Tuesday’s consumer price index showed core inflation was slightly below expectations, easing pressure for an immediate rate hike. However, Trump’s tariffs — a 145% tariff on Chinese goods and a 50% tariff on copper — could cause the Fed’s preferred inflation gauge, personal consumption expenditures (PCE), to rise to 3.1% by year-end, complicating rate decisions.
In his recent testimony, Powell emphasized a "wait-and-see" attitude and mentioned the risk of tariff-driven inflation. Experts pointed out that the Fed's caution stems from the balance of its dual mission: to control inflation and support employment. Some investors believe that political pressure will force the Fed to cut interest rates ahead of schedule, which may exacerbate inflation; other investors believe that Powell's determination to maintain independence will delay the implementation of loose policies.
Experts react: Fed independence is at risk
Krishna Guha of EvercoreISI said the sudden firing of Powell would "exacerbate market stress" and could push the economy toward stagflation (rising inflation and slowing growth). Guha viewed Trump's denial as a tactical retreat to appease markets but warned the threat has not been eliminated.
Rebecca Patterson of the Council on Foreign Relations said firing Powell over alleged mismanagement, such as a $2.5 billion renovation of the Fed’s headquarters, would be “unprecedented” and could undermine investor confidence in the Fed’s independence, a cornerstone of global financial stability.
Ed Mills of Raymond James said the government pressure, including accusations of "gross mismanagement" by Powell, was aimed at creating a "negative environment" to force Powell to leave voluntarily because there were significant legal obstacles to firing him.
Former Federal Reserve Vice Chairman Alan Blinder said the pressure on Powell has never stopped, but Blinder believes that Powell will not resign because of his unwavering commitment to the independence of the Federal Reserve.
William English of the Yale School of Management said Trump's attacks could push up inflation and hurt the economy, undermining the Fed's credibility. He warned that politicizing the Fed could lead to long-term market instability.
Market sentiment
The "fear index" VIX rose sharply today, reflecting investors' concerns about the independence of the Federal Reserve. Market concerns that Powell's dismissal could trigger a "market panic" have intensified. Stocks fell, with the S&P 500 down 0.2% and the Nasdaq 100 down 0.6%, and the dollar fell 1% against the yen to 147.02. Supported by a weaker dollar and tariff uncertainties, gold's safe-haven appeal has increased.
The surge in the VIX index and the decline in the stock market reflect market concerns that Powell's dismissal could trigger a sell-off. However, some investors believe that Trump's denial may temporarily calm the market, but market concerns remain as he has not ruled out the possibility of firing Powell.
Reflecting investor uneasiness, the CBOE Volatility Index, or VIX, the “fear index,” surged, the dollar weakened and stocks fell.
Trump's latest stance: Conflicting signals to Powell
In his remarks at Joint Base Andrews, reported by Reuters and Bloomberg, Trump denied any intention to fire Powell, saying "we have no plans to do anything" and dismissing suggestions that a letter to fire the Fed chairman had been drafted.
At the same time, he expressed dissatisfaction with the Fed's high interest rate stance, emphasizing that he prefers to be led by "people who support low interest rates" and made it clear that he is "only interested in 'low interest rate people' as Fed chairman." Trump also mentioned Kevin Hassett as a possible candidate for Fed chairman, but he said that another competitor, Treasury Secretary Scott Bessant, may continue to hold his current position because of his excellent work.
Although Trump publicly denied it, Reuters quoted sources as saying that he was still considering firing Powell and had sought the opinions of Republican lawmakers, and the positive response from lawmakers sparked speculation that he would take action soon. Trump said, "Republicans are pushing for the dismissal of Powell, and my position is more conservative."
Bloomberg reported that a White House official said Trump would "probably" fire Powell "soon," further adding to market uncertainty. Trump said, "(about not firing Powell) unless there is fraud in the renovation process."
The emergence of these contradictory signals stems from the latest remarks of Florida Congresswoman Ana Paulina Luna, who said that after meeting with Republican lawmakers on July 15, she was "99% sure" that Trump would take action to fire Powell. The contradiction between Trump's public denial and private consideration of firing reported by Reuters has exacerbated market volatility, and the VIX index has risen sharply, reflecting investors' concerns about the damage to the stability of the Federal Reserve.
Market sources said that U.S. congressmen canceled their dinner with Federal Reserve Chairman Powell. This change further triggered market speculation about Powell's situation and the continuity of the Fed's policies.
Fed policy: rate cut probability and tariff tensions
The Chicago Mercantile Exchange (CME) "FedWatch" tool shows that the probability of maintaining the interest rate in the range of 4.25%-4.5% in July is 95.3%, the probability of a 25 basis point rate cut in September is 64.9%, and the probability of a 50 basis point rate cut is 3.1%. This probability has increased from 60% last week, reflecting the weakening inflation data: the producer price index (PPI) in June was flat month-on-month (expected to be 0.2%), and the core PPI was 0.0% month-on-month and 2.6% year-on-year, both lower than expected.
Tuesday’s consumer price index showed core inflation was slightly below expectations, easing pressure for an immediate rate hike. However, Trump’s tariffs — a 145% tariff on Chinese goods and a 50% tariff on copper — could cause the Fed’s preferred inflation gauge, personal consumption expenditures (PCE), to rise to 3.1% by year-end, complicating rate decisions.
In his recent testimony, Powell emphasized a "wait-and-see" attitude and mentioned the risk of tariff-driven inflation. Experts pointed out that the Fed's caution stems from the balance of its dual mission: to control inflation and support employment. Some investors believe that political pressure will force the Fed to cut interest rates ahead of schedule, which may exacerbate inflation; other investors believe that Powell's determination to maintain independence will delay the implementation of loose policies.
Experts react: Fed independence is at risk
Krishna Guha of EvercoreISI said the sudden firing of Powell would "exacerbate market stress" and could push the economy toward stagflation (rising inflation and slowing growth). Guha viewed Trump's denial as a tactical retreat to appease markets but warned the threat has not been eliminated.
Rebecca Patterson of the Council on Foreign Relations said firing Powell over alleged mismanagement, such as a $2.5 billion renovation of the Fed’s headquarters, would be “unprecedented” and could undermine investor confidence in the Fed’s independence, a cornerstone of global financial stability.
Ed Mills of Raymond James said the government pressure, including accusations of "gross mismanagement" by Powell, was aimed at creating a "negative environment" to force Powell to leave voluntarily because there were significant legal obstacles to firing him.
Former Federal Reserve Vice Chairman Alan Blinder said the pressure on Powell has never stopped, but Blinder believes that Powell will not resign because of his unwavering commitment to the independence of the Federal Reserve.
William English of the Yale School of Management said Trump's attacks could push up inflation and hurt the economy, undermining the Fed's credibility. He warned that politicizing the Fed could lead to long-term market instability.
Market sentiment
The "fear index" VIX rose sharply today, reflecting investors' concerns about the independence of the Federal Reserve. Market concerns that Powell's dismissal could trigger a "market panic" have intensified. Stocks fell, with the S&P 500 down 0.2% and the Nasdaq 100 down 0.6%, and the dollar fell 1% against the yen to 147.02. Supported by a weaker dollar and tariff uncertainties, gold's safe-haven appeal has increased.
The surge in the VIX index and the decline in the stock market reflect market concerns that Powell's dismissal could trigger a sell-off. However, some investors believe that Trump's denial may temporarily calm the market, but market concerns remain as he has not ruled out the possibility of firing Powell.
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