US President Donald Trump has escalated his criticism of Federal Reserve Chair Jerome Powell, threatening to name a new Fed Chair sooner rather than later. The move could be seen as an attempt to pressure Powell into lowering interest rates and has sparked predictions from market experts on what this might mean for the economy.
According to José Torres, senior economist at Interactive Brokers, a new Fed Chair who supports lower interest rates would likely boost the stock market, particularly sectors like real estate, industrials, and technology. The S&P 500 could see an immediate lift with such a development.
However, Peter Berezin, chief market strategist at BCA Research, warns that inflation expectations may rise if Trump’s preferred candidate for the new Fed Chair is announced prematurely. This could lead to higher long-term interest rates, causing bond yields to spike.
Berezin also notes that the credibility of the new Fed Chair will be crucial in determining how markets react. If it’s a well-respected figure like Christopher Waller, who already has a strong reputation among central bankers, the market is likely to be more favorable. However, if Trump’s preferred candidate lacks credibility, bond yields could rise.
Ultimately, the path for interest-rate cuts largely depends on incoming inflation data and Fed decision-making. While Trump’s push for an early new Fed Chair may have some impact, it’s unlikely to significantly alter the trajectory of rate cuts, especially given the need for FOMC members to come to a consensus before making decisions.
Source: https://www.businessinsider.com/trump-powell-fed-chair-interest-rates-inflation-stock-market-bonds-2025-7