“These are very fundamental policy changes,” Mr Powell told the Economic Club of Chicago.<\/p>\n
“There isn’t a modern experience of how to think about this.”<\/p>\n
He said the tariff levels were “significantly larger than anticipated” and that they could result in both lower growth and higher inflation, making it difficult for the Fed to react, essentially ruling out a rate cut.<\/p>\n
While those comments sent stocks sharply lower on Thursday, Mr Trump’s attacks over the weekend, including confirmation from Kevin Hassett, Director of the National Economic Council, that Mr Trump was examining whether it would be possible to fire Powell, sent Wall Street plunging again on Monday.<\/p>\n
On Thursday, US time, Mr Trump posted on social media<\/a> that Mr Powell’s termination could not come fast enough. On Monday, he doubled down, labelling the Fed chair “Mr Too Late, a major loser”<\/a>.<\/p>\n Why the market meltdowns may have been a trial run<\/a><\/p>\n While the past few days has seen calmness return to markets, many of the financial world’s best minds fear further falls \u2014 and warn we’re nowhere near the end, unless America backs away from its current policy.<\/p>\n “I think that is terrifying markets, because a politicised Fed would be one in which we see much higher inflation, and accordingly, much higher interest rates eventually, which would ultimately lead stock markets into a massive crash,” said Monash University economist Zac Gross.<\/p>\n Once again, the falls weren’t confined to stocks.<\/p>\n Bond prices also fell, sending market interest rates higher, a trend that first emerged a fortnight ago<\/a> and which forced the president to delay implementing his “Liberation Day” tariffs by three months.<\/p>\n In addition, the US dollar came under renewed attack as nervous investors, concerned about a compromised US Fed, abandoned US government bonds and shifted their money out of the country and instead headed to alternative safe havens such as the Swiss franc and gold.<\/p>\n “You almost need a degree in psychology to forecast where the economy and stock market are going,” Dr Gross told ABC News.<\/p>\n “That’s because almost everything that’s happening is happening through the actions of one man, Donald Trump,” he said.\u00a0<\/p>\n “So, the real question of whether the stock market is going to continue falling, or maybe even stage recovery is really a question of ‘Is Donald Trump going to stop hitting the economy in the face with his own policy decisions?'”<\/p>\n Loading…Can Trump fire US Fed chair Powell?<\/p>\n The Federal Reserve lawyers believe the US president doesn’t have the power to fire Jerome Powell.<\/p>\n But the US Supreme Court is expected to rule within days about whether Mr Trump has the authority to remove board members from two other independent agencies, which may embolden him to move against Mr Powell.<\/p>\n The White House has repeatedly attacked the judiciary, Congress and the bureaucracy for any decisions that are not in keeping with its decrees.<\/p>\n