U.S. stock markets suffered steep losses Monday after President Donald Trump intensified his public campaign against Federal Reserve Chair Jerome Powell, a first-term Trump appointee.

Last week, Powell delivered one of his bluntest assessments yet of the Trump administration’s sweeping new tariffs, warning they could push the U.S. economy into a rare and dangerous combination of slowing growth and rising inflation—known as stagflation.

Speaking at the Economic Club of Chicago, Powell said the scale and unpredictability of the tariffs had left the Fed in “uncharted waters,” and that the central bank’s best course was to hold rates steady until the economic impact became clearer. He warned that facing both rising prices and slowing economic growth would put the Fed in a challenging position, since its typical strategies—raising interest rates to control inflation or lowering them to boost growth—could end up conflicting with each other in this situation.

Trump responded with a barrage of personal attacks on Powell, whom he derided as “Mr. Too Late” and a “major loser,” insisting that the Fed chair was acting too slowly and risked triggering an economic slowdown unless rates were cut “NOW”. On social media and in public remarks, Trump claimed the U.S. faced “virtually no inflation” and that preemptive rate cuts were needed to prevent a downturn. He also openly mused about firing the Fed chair, a move that would break with decades of precedent and challenge the legal protections for central bank independence.

Powell’s term expires in May 2026.

Powell has repeatedly asserted that the president lacks the legal authority to dismiss him absent cause, and has pledged to defend the Fed’s independence.

The escalating feud rattled investors already anxious over Trump’s trade policies. On Monday:

• The S&P 500 dropped 2.36%.
• The Dow Jones Industrial Average fell about 2.48%.
• The Nasdaq Composite tumbled around 2.55%.

Powell’s handling of interest rates played a complex and pivotal role in the U.S. economy’s recovery under President Biden, who reappointed Powell in 2022. After the pandemic-induced recession, the Federal Reserve, under Powell’s leadership, initially kept interest rates at historic lows to support economic growth and job recovery. This policy helped fuel a rapid rebound in employment and consumer spending, contributing to strong GDP growth and a robust job market, with unemployment remaining below 4% even after the fastest rate-hiking cycle in four decades.

However, as inflation surged to multi-decade highs in 2022, the Fed shifted course and began aggressively raising rates. By late 2023, rates had reached their highest levels since 2007, a move designed to cool inflation by making borrowing more expensive and slowing demand. This strategy eventually succeeded in bringing inflation down from its peak of 9.1% in June 2022 to around 2.6%–2.8% by March 2025, though it did not yet reach the Fed’s 2% target.

The higher rates, while effective in curbing inflation, also created headwinds for interest-sensitive sectors like housing and commercial real estate, and led to higher debt costs for consumers, businesses, and the government. Despite these challenges, the overall economy remained resilient, with continued job growth and steady consumer spending helping to avert a recession.