Following days of escalating criticism of the central bank leader for failing to lower interest rates, President Donald Trump on Tuesday retracted his threats to dismiss Federal Reserve Chair Jerome Powell.
I have no intention of firing him,” Trump said Tuesday while addressing reporters in the Oval Office. “I would like to see him be a little more active in terms of his idea to lower interest rates,” he said. Wall Street responded immediately favourably to the de-escalation, as equity index futures surged by over 2% when trading resumed Tuesday night.
Following Trump’s frequent attacks on Powell during the Easter holiday weekend for not lowering interest rates further since he took office in January, stocks, bonds, and the US currency all fell on Monday.
This is a definite positive, regardless of whether it was the plan all along or just Monday’s ruthless preview of what would happen in markets if he did attempt to fire Powell,” commented Evercore ISI Vice Chairman Krishna Guha. Although these risks still exist, they significantly lower the possibility of worst-case scenarios like stagflation and the tariff crisis turning into a sovereign debt crisis.
In his Tuesday Q&A session with reporters, Trump also expressed hope that a trade agreement with China may significantly lower tariffs, which encouraged investors.
He implied that a final agreement would not be “anywhere near” existing tariff rates and stated that a deal would result in “substantially reduced” taxes on Chinese imports. However, “it won’t be zero,” he continued.
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