Powell’s Standoff with Trump

Jay Powell, the Federal Reserve Chairman, was seen alongside President Trump during more stable times back in 2017. However, the current economic landscape is anything but stable, especially with the looming prospect of a second Trump presidency. As Powell and the Fed have seemingly achieved the remarkable feat of a soft landing—successfully curbing inflation without sending the economy into a recession—they have proven many skeptics on Wall Street wrong.

Yet, an even greater uncertainty hangs in the air regarding what a potential Trump 2.0 could mean for interest rates, the independence of the Federal Reserve, and Powell’s own position within the institution.

This tension came to a head during the Fed’s recent news conference. Typically characterized by a lack of drama, this particular event featured moments of significant intensity that almost overshadowed the announcement of a quarter percentage point cut in the benchmark lending rate. When asked by Victoria Guida from Politico if he would consider resigning at Trump’s request, Powell firmly stated, “no.” His response became even more pronounced when another journalist inquired about the legality of the president firing him. “Not permitted under the law,” Powell asserted.

Trump has stirred controversy by suggesting that a president should indeed have a role in shaping interest rate policy. Additionally, there have been rumors circulating within Trump’s camp that he might attempt to sideline Powell should he be re-elected—a notion Trump had previously toyed with during his first term after appointing Powell in 2017.

As the news conference progressed, the S&P 500 index climbed, ultimately closing at yet another record high, while Treasury bonds also experienced a rally.