Trump's Fed criticism sinks stocks, dollar

President Donald Trump's persistent criticism of Federal Reserve Chair Jerome Powell has significantly impacted U.S. financial markets, leading to a notable decline in both stocks and the dollar. On April 21, 2025, market indices reflected this turmoil, with the Dow Jones Industrial Average plummeting over 1,000 points (2.6%), while the S&P 500 and Nasdaq followed suit with declines of 2.66% and 3%, respectively . This turmoil can be attributed to Trump's derogatory remarks about Powell and his calls for reduced interest rates, which have raised concerns regarding the Fed's independence and credibility among investors.

In a social media post, Trump called on Federal Reserve chair Jerome Powell to cut interest rates "pre-emptively" to help boost the economy, saying Powell had been consistently too slow to respond to economic developments.

"There can be a SLOWING of the economy unless Mr. Too Late, a major loser, lowers interest rates, NOW," he wrote.

Trump's criticism of Powell's handling of the US economy comes as his own plans for tariffs have driven a stock market sell-off and raised fears of economic recession.

Shortly after the US stock market opened Monday morning, Trump once again attacked Powell for ostensibly not cutting interest rates fast enough. Stocks immediately tumbled and the US dollar fell to its lowest level in three years.

While Trump’s tariff plan has been disruptive, the uncertainty it created had, to an extent, become priced in. Markets famously hate uncertainty, but the 90-day pause on the administration’s most aggressive tariffs offered a measure of reassurance that Trump may relent if there’s enough of a negative reaction.

In a note on Monday morning, Renaissance Macro's head of economics Neil Dutta wrote that getting rid of Powell in dramatic fashion would "upset the bond market."

"Risk premiums would rise sharply as investors question the central bank’s independence and longer run interest rates would surge," Dutta wrote.

This in it of itself could be a headwind for stocks as interest rate volatility has often coincided with large sell-offs in equities. Add in the slew of other headlines that have been sending stocks lower as of late, and the result is an uncertain outlook for investors.

The ramifications of Trump’s rhetoric extend beyond mere stock fluctuations; they have also resulted in a depreciation of the U.S. dollar. On the same day, the dollar reached a three-year low after falling by approximately 0.9% . Such movements signal investor anxiety regarding economic stability amidst ongoing tariff disputes and uncertainties surrounding monetary policy. As safe-haven assets like gold surged in response to these market shifts, it becomes evident that confidence in U.S. financial markets is being undermined by political interventions .

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Sarah H

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