President Donald Trump harshly criticized Federal Reserve Chairman Jerome Powell for failing to speed up the pace of rate cuts.
Concerns about central bank independence hit stocks, bonds and the dollar again on Monday.
Powell may be Trump’s scapegoat, but removing him could have serious consequences, Wall Streeters say.
President Donald Trump again slammed Federal Reserve Chairman Jerome Powell for being too slow to cut rates and warned he could remove him from his post. The latest threat to the Fed’s independence delivered an even bigger shock to markets.
Combined with tariffs, these new concerns meant the “Sell American” trade was in full swing on Monday, with U.S. stocks, Treasuries and the dollar all falling.
The S&P 500 fell 2.4%, the dollar fell to its lowest level since 2022, the 30-year Treasury yield rose about 10 basis points to 4.9%, and gold hit a record $3,500 an ounce as investors flocked to safe-haven assets.
Here’s what Wall Street’s bigwigs think of the Trump-Powell feud.
Jeremy Siegel: Powell could be Trump’s ‘scapegoat’
Jeremy Siegel said in his weekly WisdomTree commentary on Monday that if the Fed doesn’t cut rates in June, Powell “risks not only exacerbating a potential recession but also becoming a scapegoat.”
The finance professor, known as the “Wharton wizard,” said he expects the president “will increasingly blame Powell for being ‘too slow’ for any negative effects of Trump’s policies.”
Siegel added that Powell “may have technically secured his position, but that doesn’t mean he is immune from blame.”
Mark Haefele: Confidence in the Fed is in jeopardy
Removing Powell before his term ends in May 2026 “could call into question the central bank’s ability to set interest rates without political interference, and therefore the prospects for price stability,” Mark Haefele, chief investment officer at UBS Global Wealth Management, said in a note on Tuesday.
Haefele and his team said the market “will likely be very sensitive to any signs that the White House intends to oust Powell after his term ends or replace him with a more ‘susceptible’ candidate.”
Liz Ann Sonders: Powell’s departure could lead to higher interest rates
Liz Ann Sonders, chief investment strategist at Charles Schwab Removing Powell and appointing a more compliant Fed chair would undermine the central bank’s crucial independence, Sanders said on the Schwab Network’s “Market Close” show on Monday.
In that scenario, “any preemptive, aggressive easing by the Fed that is inconsistent with its mandate” would “likely not have the desired effect of boosting growth or confidence,” Sanders said.
It could even push up long-term bond yields, “which largely defeats the purpose of the move,” she warned.
Jim Reed: Powell’s colleagues could revolt
Powell has a big say in Fed decisions, but monetary policy is determined by a majority vote, “so removing Powell could lead to a pushback from other members to increase pressure on the Fed to implement easier policy,” Deutsche Bank’s Jim Reed said in a note on Tuesday.
Reed and his team added that investors are concerned that the U.S. could lose its credibility as a country with an independent central bank whose monetary policy is not swayed by politics.
Nouriel Roubini: Trump’s threats are an ‘own goal’
Nouriel Roubini, professor emeritus of economics at NYU Stern and known as “Dr. Doom,” said the Fed’s top economist, who has a long history of success in the past few years. “Trump is shooting himself in the foot by talking about firing Powell,” Roubini said in an X thread on Monday.
Roubini called it a “repeated own goal” because the rumors have hit stocks, bonds, credit spreads and the dollar. He said that even if Trump succeeds in firing Powell, it would be a “completely Pyrrhic victory because the result would be an unmooring of inflation expectations and higher bond yields.”
If Trump plans to blame Powell for rising inflation and slowing growth, it is “not clear that this clumsy blame game will work even among the demoralized Make America Great Again supporters, let alone the financial markets,” Roubini said.
Paul Krugman: Trump makes Powell’s job more difficult
“Trump’s attempts to bully the Fed are particularly ominous because the Fed will soon have to deal with the stagflation crisis that Trump has created,” Krugman said on his Substack. ”
The former MIT and Princeton professor and Nobel laureate said Powell will soon have to choose between raising rates to fight inflation and cutting them to fight a recession.
Krugman said the president’s threats have complicated the decision. “Powell’s predicament is compounded by Trump’s attempted bullying tactics, as a rate cut would be seen by many as a sign that Powell is capitulating to avoid being fired.”
Michael Avery: Trump isn’t the only one questioning the Fed
Rabobank’s Michael Every said in a note on Tuesday that Trump’s criticism of Powell as “Mr. Too Late” and “Big Loser” was a “comic punch” to the Fed chairman.
But the president isn’t the only one frustrated with the Fed, Avery continued.
“To be honest, a lot of what Trump said is the same as a lot of what many people in the market who cover the Fed say — just less politely; and in the eyes of these commentators, very inappropriate,” said the global strategist at Rabobank. ”
Peter Schiff: Trump wants a ‘loyal soldier’
Peter Schiff, chief economist at Euro Pacific Asset Management, outlined what Trump might seek in a successor to Powell.
He said in a weekend X post that Trump “may nominate the most dovish successor to the Fed chair ever.”
Schiff added that the president’s choice would be a “loyal soldier, willing to sacrifice the dollar, create as much inflation as possible, monetize the exploding debt, and thus keep interest rates artificially low.”
