Latest / Markets with Megan: A Quick Financial Markets Update / Can Trump Really Fire the Fed Chair? | S2 E034 | 04-21-25

Transcript

Can Trump Really Fire the Fed Chair? | S2 E034 | 04-21-25 · Markets with Megan: A Quick Financial Markets Update

• 0:00
  Megan Horneman: Investors keep getting whipsawed by Washington and now it's not necessarily tariffs but is there the chance that President Trump can fire the Federal Reserve Chairman?
• 0:09
  Megan Horneman: It's Monday, april 21st, and this is an impact report.
• 0:13
  Megan Horneman: We wanted to come to you today because this topic is making a lot of headlines and it's also resulting in, yet again, another negative start to the week from an equity perspective.
• 0:24
  Megan Horneman: So let's break this down.
• 0:26
  Megan Horneman: Last week, the Trump administration had made some comments in the Oval Office about his desire of wanting to fire the Federal Reserve chairman, so is this something possible?
• 0:38
  Megan Horneman: The short answer is really anything's possible, but the logical answer is no, and this is not something that we foresee happening.
• 0:46
  Megan Horneman: But why is it getting talked about now?
• 0:48
  Megan Horneman: The Supreme Court is hearing a case where the Trump administration did fire two federal labor board members, and the Supreme Court is deciding on whether or not the Trump administration overstepped their authority by doing this.
• 1:03
  Megan Horneman: If the Supreme Court sides with the Trump administration onstepped their authority by doing this, if the Supreme Court sides with the Trump administration on the firing of these two independent members, then there's this thought that he could then overstep the bounds by firing the Federal Reserve chairman.
• 1:17
  Megan Horneman: This is something we simply do not see happening.
• 1:20
  Megan Horneman: First of all, Trump did appoint a Federal Reserve Chairman, Jerome Powell, in 2017.
• 1:26
  Megan Horneman: Even in his first term, he was very vocal about wanting Powell to cut interest rates and keep interest rates low.
• 1:33
  Megan Horneman: So the comments he's been making about cutting interest rates isn't anything new.
• 1:37
  Megan Horneman: Trump has always wanted low interest rates.
• 1:39
  Megan Horneman: He was then reappointed by the Biden administration in 2021.
• 1:44
  Megan Horneman: And his term does not go up until May of next year.
• 1:47
  Megan Horneman: Now Trump wants preemptive rate cuts because he is watching the markets in quite a bit of stress here over the past month or so as well, as the economy is starting to slow.
• 1:59
  Megan Horneman: But the Fed's not going to come in and just make changes to monetary policy because of what's going on in the markets.
• 2:07
  Megan Horneman: Instead, they're focusing on their dual mandate of price stability, which the tariffs are threatening the price stability and then maximum employment, and while we have seen cracks in the labor market, the unemployment rate still is relatively low.
• 2:23
  Megan Horneman: So there is no need for them to act right now, and we have been very vocal about not wanting the Fed to act, because we are entering a period with tariffs that do run a major inflation threat and the Fed doesn't want to get stuck behind the curve, and they also have been very vocal about not wanting any stop and go monetary policy.
• 2:44
  Megan Horneman: So we think the Fed still stay on hold in at the May meeting.
• 2:49
  Megan Horneman: We don't think that the Trump administration will take it as far as firing the Powell, and that's because several things.
• 2:56
  Megan Horneman: First of all, we will lose all credibility around the world.
• 2:59
  Megan Horneman: We think that the dollar will tank on that type of news and then we'll see a massive market sell-off.
• 3:05
  Megan Horneman: That would be much more difficult for the Trump administration to get out of than just to continue the negotiations.
• 3:13
  Megan Horneman: From a tariff perspective, give the Federal Reserve a bit more clarity of what they're even dealing with, because right now we're still in that negotiating phase and the Federal Reserve doesn't know exactly what this can do to inflation.
• 3:26
  Megan Horneman: All that anyone knows is tariffs are an inflation threat.
• 3:31
  Megan Horneman: So we do not foresee this happening.
• 3:34
  Megan Horneman: You'll see headlines about this.
• 3:35
  Megan Horneman: You'll see rhetoric pick up.
• 3:37
  Megan Horneman: You'll have an opinion from everybody.
• 3:38
  Megan Horneman: Our opinion is that this is just a lot of talk.
• 3:41
  Megan Horneman: The chairman will continue his term through May of 26, but you will probably hear more rhetoric in the coming months ahead of maybe who Trump may want to replace Powell with when his term does come up.
• 3:54
  Megan Horneman: That's all we have today.
• 3:56
  Megan Horneman: If you want a history of our podcast, you can go to marketswithmegan.
• 3:58
  Megan Horneman: fm.
• 3:59
  Megan Horneman: Thank you.