President Trump stated on Wednesday that he is "very unlikely" to fire Federal Reserve Chair Jerome Powell. His comments came just hours after it was reported that Trump discussed firing Powell in a private meeting with Republican lawmakers in the House. This news initially caused a drop in the U.S. stock market and volatility across the bond market.
In a meeting in the Oval Office with the Crown Prince of Bahrain, Trump stated that fraud was the only condition under which Powell could be dismissed. This move comes after internal criticisms regarding the overruns in the $2.5 billion Fed renovation project. The Fed has denied any wrongdoing and requested a full investigation into the matter.
News about the possibility of Powell being dismissed caused the S&P 500 to drop 0.5% earlier. Treasury yields also fluctuated sharply before easing their decline after Trump's comments. The market remains sensitive to signs of politicization from the Fed before Powell's term ends in 2026.
Senate Opposes When Fed Independence Receives Support
Republican senators expressed concern about the consequences of firing the Fed chair due to policy disagreements. Senator Thom Tillis warned of serious risks to the credibility of U.S. financial institutions if the Fed loses its independence. Tillis emphasized that placing the Fed under the direct control of the president would be a strategic mistake.
Senator John Kennedy stated that Powell has done a "good job" despite some policy disagreements. Senate Majority Leader John Thune added that Trump currently has no firm intention to fire Powell. The House Financial Services Committee canceled a scheduled meeting with Powell due to a voting conflict.
Trump nominated Powell in 2017, and Biden reappointed him in 2021. Powell has repeatedly stated his commitment to serve his term until May 2026. Treasury Secretary Scott Bessent confirmed that the formal process to find a potential successor has begun.
Bitcoin rose from $116,800 to $119,200 throughout the day, continuing its upward trend during the London and New York trading sessions. The Asian trading session opened with light selling pressure, but the upward trend returned as risk sentiment improved. The daily volatility of BTC reflects the easing of market tensions regarding Powell's stance and the outlook for stable interest rate policy.
