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- 'Ripping the fabric of the universe:' Trump targets Powell, and investors react</p>
<p>Andrea Riquier, USA TODAY July 16, 2025 at 4:34 PM</p>
<p>President Donald Trump on Wednesday escalated his talk about removing Federal Reserve Chairman Jerome Powell, telling reporters that Republican lawmakers supported firing the central bank chief.</p>
<p>While Trump later denied that he plans to fire Powell, many finance and economic experts say the attacks are damaging to financial markets, and perhaps the U.S. political system as well.</p>
<p>"Certainly the rhetoric is creating volatility and uncertainty among investors," said Jack Ablin, Chief Investment Officer at Cresset Capital, which has $65 billion in assets. "Today was really a microcosm. Earlier in the day, investors were fretting that Trump would fire Powell and we saw rates higher and stocks lower. And then Trump came out and said no, I'm not firing Powell. Lo and behold, bond yields came down and equities went up. So I do think it is creating concern. I think investors would like to see an independent Fed."</p>
<p>Stocks closed the day higher, and U.S. Treasury yields were mostly lower.</p>
<p>"I talked about the concept of firing him," Trump said to reporters, gathered in the Oval Office where he was meeting with Crown Prince Salman bin Hamad Al Khalifa of Bahrain. "I said, 'What do you think?' Almost every one of them said I should but I'm more conservative than they are.''</p>
<p>More: Trump denies plans to fire Fed Chair Jerome Powell despite what he told Republicans</p>
<p>Later, he added, "When we were talking about it I asked, what would you do about that. They all said, we'd fire him.''</p>
<p>Jerome Powell, Chair of the Federal Reserve, speaks to the Senate Banking, Housing, and Urban Affairs committee for the Semi-Annual Monetary Policy Report on Feb. 11, 2025.</p>
<p>Although Trump nominated Powell to helm the Fed in his first term, he has frequently criticized the central bank chief, especially since starting his second term, berating him for not slashing a key interest rate in order to jump-start the economy and lower federal debt payments.</p>
<p>Fed watchers are well aware that it's not new for presidents to pressure the central bank. Both Lyndon Johnson and Richard Nixon were known to dislike the Fed chiefs who served during their terms, and to try to pressure their policies, said Steve Blitz, chief U.S. economist at GlobalData.</p>
<p>"The difference is that Trump does it in public and believes that doing it in public gives him strength," Blitz told USA TODAY.</p>
<p>Blitz and other analysts also believe it's dangerous that Trump is able to sway other lawmakers to his point of view. "He's the first (president) that somehow seems to be able to get the establishment to crater. I don't really understand it. Everyone says they're afraid of him. Are you a patriot or not?"</p>
<p>Although Powell's term as Fed chairman ends in 2026, he can stay on as a governor on the Fed board until 2028. Powell has said that he intends to serve out his term, and believes Trump does not have the legal authority to fire him.</p>
<p>In a May 22 ruling, a majority of Supreme Court justices signaled that they believe Trump wouldn't be allowed to fire Powell, arguing the Federal Reserve is "a uniquely structured, quasi-private entity" that is different from other independent agencies. The line was part of a Supreme Court opinion allowing Trump to fire two federal labor board members.</p>
<p>David Kotok, co-founder of Cumberland Advisors, which has $3.5 billion in assets, points out that the Fed, under Powell's leadership, has capably managed through several crises on its watch, from the pandemic emergency response to the swift resolution of that crisis, to a spate of bank failures in 2023.</p>
<p>"That's Jay Powell at work," Kotok told USA TODAY. "To me, the man is a pillar of honesty and leadership and maintains his public demeanor and discipline in the face of an onslaught of verbal abuse which is unnecessary and harmful to the U.S., its image in the world, and to our banking and financial system. The only reason the harm is not evident in the market is because the Fed puts a premium on financial stability."</p>
<p>For investors, a perennial question is whether and when markets will react strongly enough to lead politicians to backtrack.</p>
<p>One recent example took place in April, after the White House unveiled its shock-and-awe tariff proposals. Investors ditched bonds at the fastest pace in decades, concerned about the impact of those tariffs on the U.S. debt and the economy. Since then, tariff deadlines have shifted frequently.</p>
<p>More: The bond market sell-off is more worrisome than the one in stocks. Here's what to know.</p>
<p>But investors haven't yet reacted forcefully enough to the notion that Trump will be able to fire, or bully Powell out of a job.</p>
<p>That's in part because of a widespread belief that the president will eventually cave, said Blitz, referencing the so-called "TACO" — Trump Always Chickens Out — trade. The acronym describes the president's pattern of announcing hefty new tariffs, causing economic shock, panic and stock declines – only to reverse course later with pauses or reductions that create a market rebound.</p>
<p>"The market has this idea that he's going to bully and bully and bully, but he'll never actually do it," Blitz said. "But I think this is where the danger lies, which is that Trump pushes to the outer reaches of the universe. People expect the fabric of the universe to snap and push him back to the middle, right? But they don't really understand that he is intent on ripping the fabric of the universe. He keeps pushing and pushing and pushing, softening the opposition every time he does it, and then he will break through."</p>
<p>This article originally appeared on USA TODAY: Trump amps up pressure on Fed Chair Powell, and investors react</p>
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