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Market Turmoil: Trump Critiques Federal Reserve Chair
U.S. financial markets experienced significant declines as President Donald Trump escalated his criticism of Federal Reserve Chair Jerome Powell, labeling him “a major loser” for his reluctance to lower interest rates.
In a targeted social media message, Trump urged Powell to take “pre-emptive” action by cutting rates to stimulate economic growth, criticizing the Federal Reserve for being slow to respond to evolving economic conditions. “There can be a SLOWING of the economy unless Mr. Too Late, a major loser, lowers interest rates, NOW,” he stated.
This altercation comes at a time when Trump’s own tariff measures have triggered a market downturn and noticeably heightened recession fears. The ongoing discord between the president and Powell, whom Trump appointed during his initial term, has further exacerbated uncertainties in the market.
The S&P 500 index, which encompasses 500 of the largest U.S. corporations, saw a decrease of approximately 2.4% on Monday alone, marking a consistent loss of around 12% since the beginning of the year. Similarly, the Dow Jones Industrial Average experienced a 2.5% drop, with an overall decline of about 10% thus far in 2023, while the Nasdaq Composite fell by more than 2.5%, reflecting an 18% drop since January.
Typically regarded as safe havens during financial turbulence, both the dollar and U.S. government bonds have shown vulnerability amid the recent upheaval. The dollar index, which tracks the currency’s strength against several others including the Euro, hit its lowest point since 2022. Concurrently, yields on U.S. Treasuries have risen, indicating that investors are seeking higher returns to hold government debt, reflecting increased uncertainty.
Trump’s critique of Powell is not new; it dates back to his prior term when discussions surrounding the potential dismissal of the Fed chair were rumored. Following his re-election, Trump has consistently advocated for lower borrowing costs to buoy the economy.
The latest round of criticism arrives in the wake of Powell’s warnings that Trump’s tariff policies could exacerbate inflation and hinder economic growth. Last week, Trump went so far as to publicly call for Powell’s removal, asserting on social media, “Powell’s termination cannot come fast enough.”
Such a removal, however, would not only stir significant controversy but also present legal challenges, as the Federal Reserve is traditionally known for its operational independence. Powell remarked last year that he doubts the president possesses the lawful authority to dismiss him.
Despite the legal complexities, one of Trump’s senior economic advisers confirmed on Friday that the administration was exploring the possibility of such an action, coinciding with a day when the U.S. stock market was not operational.
Source
www.bbc.com