Markets declined on Wednesday following hawkish comments from Powell, who criticized Trump's tariff policy, warning that it could lead to an economic slowdown and rising prices, a phenomenon known economically as 'stagflation'. Powell made it clear in his remarks that his primary focus is currently on prices, suggesting a shift towards a more hawkish monetary policy than anticipated.
Trump, who had nominated Powell to head the Federal Reserve during his first term (and was then renewed by President Biden for a second four-year term), expressed his dissatisfaction with Powell since returning to the White House. However, Powell, who will remain in office until May 2026, has repeatedly affirmed his intention to complete his term, indicating that the president has no legal basis for his removal.
The Wall Street Journal reported on Thursday that Trump has been secretly discussing the possibility of firing Powell for months, citing informed sources. The report added that former Federal Reserve Governor Kevin Warsh is considered the leading candidate to succeed Powell, although Warsh has urged Trump not to take that step.
Treasury Secretary Scott Bessent also joined Warsh in warning against firing Powell, cautioning that such a move could destabilize the fragile U.S. markets at a time when the central bank is supposed to be independent from political influences.
The odds of Trump firing Powell this year in the blockchain-based prediction market 'Polymarket' rose to 19%, the highest reading since the contract launched in late January.
