The tension between former President Donald Trump and Federal Reserve Chair Jerome Powell is heating up again—and Wall Street is watching closely. Trump recently stirred headlines with reports that he was preparing to fire Powell. However, he later walked back those claims, saying he’s “not planning” to remove him—at least not yet. The drama sent shockwaves through the stock and bond markets, as investors fear political interference at the FED could disrupt economic stability. Here’s how the situation is unfolding and what it means for stocks, yields, and the future of the central bank.
Trump’s War of Words With Powell Escalates
Trump hasn’t been shy about expressing his displeasure with Jerome Powell. He’s called him names like “fool” and “moron” and blames him for not slashing interest rates fast enough. The latest flare-up began when reports claimed Trump was close to firing Powell. Trump even asked GOP lawmakers if he should do it—many reportedly said yes. Yet, when questioned publicly, Trump insisted he hadn’t written a firing letter and said, “I’m not planning” to fire him.
Despite this, Trump left the door open. He suggested fraud involving the Fed’s $2.5 billion renovation project could be cause for removal. Some viewed this as a potential legal justification to push Powell out. Trump’s mixed messages are keeping markets on edge, especially since Powell’s term doesn’t end until May 2026. Meanwhile, Trump already seems to be shopping for replacements, including names like Kevin Hassett and Christopher Waller.
FED Pressure Sends Stocks Into a Spin
The stock market wobbled as rumors of Powell’s firing gained traction. The S&P 500, Dow, and Nasdaq all dipped before slightly recovering after Trump clarified his position. Solid earnings from companies like Bank of America and Johnson & Johnson helped stabilize things, but uncertainty remains. Traders are trying to read between the lines—is this all talk, or will Trump actually act?
Adding fuel to the fire, recent inflation data came in hotter than expected. The Consumer Price Index rose at its fastest pace since February, while wholesale prices (PPI) offered a mixed message. Investors initially hoped for a rate cut from the FED. Now, the odds of that happening in September are dropping. Wall Street doesn’t like surprises—and this Powell drama is a big one.
The Bond Market Doesn’t Trust Trump on the FED
While stocks recovered a bit, bond markets didn’t buy Trump’s calming words. Yields jumped sharply when firing rumors surfaced, with the 10-year nearing 4.5% and the 30-year breaking 5%. Rising yields mean investors are selling bonds, usually a sign of rising uncertainty. Many see Trump’s threats as a challenge to the FED’s independence—a red flag for economic stability.
Experts warn that continued pressure from Trump could backfire. A nervous bond market can push borrowing costs higher, slow down investment, and hit growth. Jon Hilsenrath, a respected FED watcher, put it bluntly: “The bond market will decide Powell’s fate.” If investors fear political meddling, they’ll demand more yield—making life harder for businesses and consumers alike.
FED Still on Pause, But the Clock Is Ticking
The Federal Reserve is walking a fine line. It’s facing inflationary pressure, political heat from Trump, and a market that’s increasingly sensitive to every word. With Powell under fire and rate cuts now less likely before December, the FED must balance caution with credibility. According to Oxford Economics, rising prices on core goods—fueled by tariffs—may delay any easing moves further.
Meanwhile, Wall Street remains focused on the September decision. The FedWatch Tool shows less than a 60% chance of a cut. With Trump continuing to criticize Powell and hint at changes, the central bank’s next steps could be swayed by more than just data. Whether Powell survives politically may depend not only on inflation and jobs—but on Trump’s next tweet.
Stocks, Trump, and the Future of the FED
Trump’s ongoing feud with Powell is more than just personal—it’s about control over the nation’s monetary policy. Markets thrive on clarity, and Trump’s unpredictability injects risk. As the 2026 end of Powell’s term approaches, the former president is signaling a clear desire to reshape the FED. That’s spooking investors and putting Powell in the hot seat.
For now, stocks are holding steady, but volatility could return fast. If Trump reignites the firing talk or names a loyalist to replace Powell, expect more fireworks. The FED’s independence is crucial—and Wall Street knows it. The next few months will reveal whether Powell keeps his job, whether Trump makes good on his threats, and how far politics will push the central bank.