Trump Backpedals? Wall Street Rallies Behind the Fed Amid Dismissal Drama

Recently, U.S. President Donald Trump sparked fresh controversy in financial markets by reportedly considering the dismissal of Federal Reserve Chair Jerome Powell. According to multiple media outlets, Trump floated the idea during a closed-door meeting with Republican lawmakers. However, the drama saw a sudden reversal within 24 hours—Trump swiftly told the press that firing Powell was “highly unlikely.”

1. A Scare That Lasted Only Hours: Trump Backs Off Amid Market Jitters

On Wednesday, reports emerged that Trump had privately raised the idea of removing Powell and consulted Republican lawmakers for feedback. Some GOP members even expressed support. The news shook financial markets:

• U.S. Treasury yields fell sharply,
• Gold and Bitcoin rallied,
• Equities and the U.S. dollar came under short-term pressure.

Yet only hours later, Trump publicly denied the plan, stating, “I have no plans to fire him. I never rule anything out, but I think it’s highly unlikely unless there’s some kind of fraud.”

This swift reversal surprised observers. Did Trump back down under media and market pressure? The more plausible explanation is strategic: a calculated move to pressure the Fed into cutting interest rates more aggressively.

2. Why Is It So Difficult for Trump to Fire Powell?

Despite repeated criticism—calling Powell a “terrible Fed Chair” and accusing him of serving “Democratic interests”—Trump faces significant legal hurdles in attempting to dismiss the Fed Chair.

From a legal standpoint:

• Analysts at Wolfe Research point out that removing Powell would require “just cause.” Without it, Trump risks a prolonged legal battle, potentially reaching the Supreme Court.
• Roger Altman, founder of Evercore, called the idea “one of the worst” and said Powell is unlikely to resign voluntarily. Any attempt at removal would inevitably lead to a constitutional challenge.

The Supreme Court has previously affirmed the Fed’s unique legal status and independence from other federal institutions. Legal experts believe any such action would trigger immediate judicial intervention, likely resulting in an injunction.

In short, dismissing Powell would mean long, costly legal and political uncertainty—an extremely risky move for any administration.

3. Rare Unity on Wall Street: Central Bank Independence Must Be Preserved

Trump’s remarks triggered rare and vocal support for the Fed from top Wall Street executives:

• JPMorgan CEO Jamie Dimon said Fed independence is “absolutely essential” for economic and market stability.
• Goldman Sachs CEO David Solomon, Bank of America CEO Brian Moynihan, and Citigroup CEO Jane Fraser all echoed similar sentiments, stressing the importance of an independent central bank.

These industry leaders oversee more than $12 trillion in assets. Their coordinated response underscores a deep-seated concern across the financial sector that political interference in monetary policy could undermine confidence in the U.S. dollar and Treasury markets, and trigger global volatility.

4. What Did the Market Believe?

Interestingly, while Trump’s remarks stirred political headlines, the financial markets sent mixed signals:

• Prediction markets like Polymarket saw betting odds for Powell’s removal surge;
• Yet the interest rate markets (e.g., Fed funds futures) remained largely calm.

Given strong recent U.S. economic data and labor market resilience, the Fed funds futures market reacted more to fundamentals—and perhaps showed greater trust in Treasury Secretary Scott Bessent’s measured responses.

This divergence indicates that while Trump’s comments rattled some sentiment, markets are still guided primarily by policy credibility and macroeconomic data—not political theater.

5. In the End, Markets Trust Stability Over Political Noise

Taken together, it is highly unlikely that Powell will be removed before his term ends in May 2026. Trump’s swift reversal illustrates the strength of institutional guardrails protecting the Fed’s independence—safeguards that even a sitting president cannot easily dismantle.

Rather than fixate on whether Trump can oust Powell, markets would be better served by analyzing Trump’s underlying policy intentions—and what they reveal about the broader U.S. economic outlook. After all, long-term market direction will be shaped not by soundbites, but by the consistency of monetary policy and the strength of economic fundamentals.

Disclaimer: This article is based on publicly available media reports and institutional market analysis. It does not constitute investment advice. Investing involves risk. Please proceed with caution.

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