April 23, 2025: President vs. The Fed

Beginning last week and gaining steam over the weekend, President Trump’s dissatisfaction with Federal Reserve Chair Jerome Powell—and his threats to fire him—put investors on edge. The prospect of the Federal Reserve losing its independence from political influence rattled markets on Monday, sending the S&P 500, the U.S. bond market, and the dollar all lower. While President Trump is not the first president to pressure the Federal Reserve, his methods are far from conventional.

In addition to being unconventional, these methods are likely to be ineffective. If President Trump’s goal is to jawbone the Federal Reserve into cutting interest rates, his approach may well have the opposite effect. When its independence is publicly challenged, the Fed has a stronger incentive to demonstrate its autonomy by resisting political pressure. Traders appear to recognize this dynamic. Rather than increasing the likelihood of a rate cut, the President’s public threats may have diminished it.

Perhaps responding to the market’s poor reception of his threats, the President pivoted on Tuesday, clarifying that he has no intention to fire Chair Powell. While markets today are finding comfort in that pivot, the unconventional dynamics between the President and the Federal Reserve are likely to persist.

Weekly Market Update: April 23, 2025