With the US tariff blitz still causing ructions on global trading floors, investors are now dealing with the added worry that Trump will try to remove the country’s top banker.
The US president took a swipe at Powell last week for his warning that the sweeping levies would likely reignite inflation, saying his “termination cannot come fast enough” and adding that “I’m not happy with him. I let him know it and if I want him out, he’ll be out of there real fast, believe me”.
While that raised eyebrows, Trump sent shivers through markets on Monday by calling on the Fed boss again to make pre-emptive cuts to interest rates and calling him a “major loser” and “Mr Too Late”.
He said on his Truth Social platform that there was “virtually” no inflation, claiming energy and food costs were well down and pointed to the several reductions by the European Central Bank.
The outbursts have fanned concern that Trump is preparing to oust Powell, with top economic adviser Kevin Hassett saying on Friday that the president was looking at whether he could do so.
Panicked Wall Street investors once again dumped US assets, with all three main indexes ending down around 2.5 per cent on Monday.
Analysts warned of another rout should Trump try to fire the Fed boss, which many said could cause a crisis of confidence in the US economy.
“Were Powell to be fired, the initial reaction would be a huge injection of volatility into financial markets, and the most dramatic rush to the exit from US assets that it is possible to imagine,” said Pepperstone strategist Michael Brown.
“Lower, much lower, equities; Treasuries sold across the board; and, the dollar falling off a cliff.”
