U.S. President Donald Trump criticized the Federal Reserve again on Monday, and the market reacted negatively.
Analysts said investors were uneasy about the idea that the president could put pressure on the central bank.
Trump has already replaced the heads of other independent agencies, and traders may be worried that Fed Chairman Jerome Powell could be next.
The market is sending a message to President Donald Trump: Don’t mess with the Fed.
Investors dumped U.S. assets again on Monday as Trump stepped up pressure on the Federal Reserve to cut interest rates, potentially threatening the Fed’s ability to act independently of the president’s wishes. Analysts said Trump’s latest criticism further undermined investor confidence in the dollar and its dominance in global financial markets.
Themistoklis Fiotakis, senior strategist at Barclays Bank in the UK, said the market “has begun to consider de-dollarization” after Trump’s tariff policy. Fiotakis wrote that Trump is adding fuel to the fire and posing “difficult to ignore” risks to the dollar.
“The Fed’s independence is at stake… This event presents a very large tail risk not only for the dollar but also for the global financial system,” Fiotakis wrote in a note to clients.
Concerns about the Fed’s independence, combined with ongoing concerns about the impact of tariffs on the economy, led to volatility in stocks on Monday. Major indexes fell more than 2%, U.S. Treasuries sold off again and the dollar fell to its lowest level in three years.
The sell-off came after Trump called Fed Chairman Jerome Powell a “big loser” in a post on the Truth Social website on Monday and said lower inflation data called for an “immediate” rate cut. Last week, he wrote that firing Powell “came too late,” raising concerns that the president might try to fire the central banker.
Financial markets are clearly uneasy about the politicization of the central bank, Thierry Witzman, global currency and rates strategist at Australian financial services firm Macquarie, said in an interview.
“The market is happy with the rate cut. What the market is not happy about is the president or politicians telling the Fed that rates need to go down,” Witzman said.
What’s different this time?
Powell is no stranger to attacks from Trump. Trump appointed Powell as Fed chair during his first term as president, though he quickly soured on Powell and publicly criticized him. In 2019, he questioned whether Powell was more of an “enemy” of the United States than Chinese President Xi Jinping.
Despite Trump’s criticism, he ultimately chose not to remove Powell, thus avoiding any legal battles that might have ensued. Former President Joe Biden reappointed Powell as Fed chair, a term that ends in May 2026.
In his second term, Trump took a more aggressive approach in removing the leaders of independent agencies, whether it was the Federal Trade Commission or the National Labor Relations Board.
It’s unclear whether he will bring the same views to the Fed. Treasury Secretary Scott Bessant has told the White House that firing Powell could spark financial market turmoil, Politico reported. But Kevin Hassett, a senior Trump economic adviser, said on Friday that the White House would “continue to look into this matter.”
“We would be remiss to conclude that the president’s words will not lead to action,” Ian Lyngen, interest rate strategist at BMO Capital Markets, wrote in a note to clients.
If he does try to remove Powell, the issue could end up before the Supreme Court, Lyngen wrote.
“Any attempt to remove Powell would add to downward pressure on U.S. assets at a time when the administration has already injected heightened uncertainty into the economic outlook,” he wrote.
