Reports that President Donald Trump is likely to fire Federal Reserve Chair Jerome Powell have alarm over the future independence of the central bank and caused US markets to turn red.
A White House official confirmed that Trump has discussed removing Powell with congressional Republicans during a closed-door meeting, and multiple GOP lawmakers expressed support for the move.
The news sent the dollar sharply lower and dragged down major stock indexes, as investor confidence in the Federal Reserve’s stability wavered.
“Late afternoon reports suggest that the White House was likely to sack Jerome Powell soon,” said Chris Beauchamp, Chief Market Analyst at IG. “The news has put the dollar firmly on the back foot, but has dragged stocks lower too. The Fed chairman’s departure would leave the independence of the central bank in question.”
Traders fear that ousting Powell would spark chaos in bond markets and potentially lead to higher, not lower, interest rates. If confidence in the Fed and US Treasuries were to collapse if Powell is fired, borrowing costs could soar.
Powell, who has been at the helm of the Fed since 2018, has faced criticism from Trump in the past over interest rate policy. His removal would mark a significant departure from the long-standing tradition of central bank autonomy and could trigger renewed volatility in global markets.
The developments come as markets were still digesting Trump’s recent policy victories, including the passage of a major tax and spending bill and a ceasefire agreement in the Middle East. Analysts say those wins may have emboldened Trump to escalate his fight against what he sees as an overly hawkish Fed.
“Now we will see if the bond market vigilantes will put the US in their sights again,” Beauchamp added. “Such a dramatic move also suggests there is no backing down from tariffs this time around, especially with stocks at record highs.”