Financial markets experienced violent gyrations as President Trump sent conflicting signals about Federal Reserve Chair Jerome Powell's tenure. Late Tuesday, Trump reportedly told Republican lawmakers he would "soon act" to remove Powell, with senior officials claiming he'd drafted termination documents. Within hours, the President reversed course, stating: "We're not looking at that... I think it's very, very unlikely."
The whiplash triggered classic "Trump TACO" (Trump Always Chickens Out) market behavior. Stocks initially tumbled while Treasury yields spiked, the dollar retreated, and gold surged over 0.67%. Markets dramatically reversed when Trump clarified his position, with equities recovering all losses and gold paring gains.
Trump's frustration stems from Powell's monetary policy restraint. Despite the President demanding up to 3 percentage points of rate cuts, the Fed maintains its benchmark rate at 4.25%-4.5%. "His job is a very simple one: Lower interest rates," Trump asserted, while suggesting Powell's potential involvement in a $2.5 billion Fed building renovation could provide "cause" for dismissal.
Legal constraints limit Trump's authority, as Supreme Court precedent requires "just cause" to remove a Fed chair. Powell has publicly stated his position enjoys statutory protection against policy disagreements. Republican reactions split sharply: House Financial Services Committee Chair French Hill deemed dismissal unlikely, while Representative Anna Paulina Luna tweeted "99% sure" Powell would be fired.
Market resilience prevailed despite the drama. The Nasdaq closed at a record high, while the Dow Jones Industrial Average rose 231.49 points (0.53%) to 44,254.78. The S&P 500 gained 19.94 points (0.32%) to 6,263.70 as the dollar index fell 0.35%.
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