The recent comments from former US President Donald Trump have shaken the financial world. Trump has publicly and vehemently criticized Federal Reserve Chairman Jerome Powell, even demanding his dismissal. The background of this fierce critique lies in Powell’s refusal to lower interest rates as Trump wishes. Trump claims that inflation is almost non-existent and calls for preventive rate cuts, while Powell maintains his restrictive monetary policy as inflation remains above the target of 2 percent. Powell also fears that Trump’s tariff policy could further aggravate inflation.
Unusually Sharp Attacks
Trump referred to Powell as “Mr. Too Late” and a “big loser,” which is considered an unusually sharp and personal attack. The demand for Powell’s dismissal, however, is legally hardly enforceable, as his term extends until May 2026 and he refuses to resign early.
Market Uncertainty and Volatility
This escalation has led to significant uncertainty in the financial markets: the S&P 500 fell by 2.4 percent on Monday, while the Nasdaq 100 dropped by 2.5 percent. Important technology stocks like Tesla saw significant losses. At the same time, the volatility index VIX rose to a high level of 34, indicating clear fear among investors. The US dollar came under pressure, while gold gained as a safe haven.
For investors, this situation means increased uncertainty regarding interest rate developments and their impact on the stock markets. However, short-term sell-offs could also be seen as opportunities, especially if political interventions threaten the independence of the Fed and temporarily weaken the markets.
These developments are highly relevant for investors, especially concerning future interest rate decisions and their influence on global stock prices.