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Tariffs, Tweets, and Tensions: Powell Holds Firm as Trump Fires up

Jay Powell pushed out? Markets think unlikely.

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TL;DR:

  • Trump’s social media blast at Fed Chair Powell, demanding “termination,” lifts Polymarket’s “Will Trump remove Powell in 2025?” to 18% and Kalshi’s “Powell out this year” to 28%, but legal protections make ouster unlikely.
  • Tariff concerns drive a 22% chance of a major U.S. bank bailout (Polymarket), with CPI projected at 3.1% by Q3 2025 (Barclays) and $500B in bank losses (FDIC) signaling risks.
  • Markets see a 53% chance of a 25 bps Fed rate cut in July (Polymarket), potentially easing bank liquidity strains.

Market Snapshots

Event Breakdown

Trump’s Feud with Fed Chair Powell Escalates, but Removal Odds Remain Low: President Trump reignited his long-running clash with Federal Reserve Chair Jerome Powell Thursday, posting a scathing social media statement: “Powell’s termination cannot come fast enough!” The outburst followed Powell’s Wednesday remarks warning that Trump’s proposed tariffs create a “challenging scenario” for the Fed’s dual mandate of stable inflation (core PCE at 2.7% in March 2025) and robust employment (unemployment at 4.1%, BLS data). Powell highlighted potential inflationary pressures from tariffs, which Barclays projects could push CPI to 3.1% by Q3 2025, complicating rate decisions with the federal funds rate at 4.5–5%. Trump’s rhetoric, while fiery, faces legal hurdles: the President cannot unilaterally fire the Fed Chair before Powell’s term ends in May 2026, except under specific conditions like misconduct, as outlined in the Federal Reserve Act.

Markets reflect skepticism about Powell’s ouster. Polymarket’s “Will Trump remove Jerome Powell in 2025?” trades at 18% ($265K volume), up slightly from 16% in the last 24 hours, while Kalshi’s “Powell out as Chair this year” sits at 28%” ($91K volume), a sharper jump from 20% likely due to thinner liquidity.

These upticks followed Trump’s Thursday statement, suggesting a knee-jerk market reaction to the headlines. Yet, the low odds align with Powell’s defiance: in a November 2024 press conference, he bluntly rejected resignation, stating, “No,” and affirmed that removal is “not permitted under the law.” The Fed’s independence, a cornerstone of U.S. monetary policy, was echoed by Treasury Secretary Scott Bessent on April 14, who called it a “jewel box that has got to be preserved.” Bessent noted the administration is eyeing Powell’s successor but set a six-month timeline, signaling no immediate push for change (Kevin Warsh is the current favorite on Kalshi).

The feud underscores broader tensions over tariffs and monetary policy. Powell’s concerns mirror JPMorgan’s April 2025 analysis, which flagged tariffs shaving 0.5% off U.S. GDP by Q4, potentially forcing the Fed into a hawkish stance that could strain bank liquidity (FDIC estimates $500B in unrealized bank losses). Conversely, Bessent’s measured tone suggests the administration may prioritize stability, with Polymarket pricing in a 25 bps cut in July at 53%. For now, Powell’s legal protections and the Fed’s institutional weight keep removal odds low, but Trump’s rhetoric ensures volatility in market sentiment. Track the odds at Polymarket and Kalshi!

Related markets & forecasts:

Long-Tail Radar

Major U.S. Bank Bailout in 2025? (Polymarket): Launched April 10, 2025, this thinly traded market ($10,800 volume) gauges the odds of a U.S. bank with over $50 billion in assets needing a federal bailout by December 31, 2025. A bailout includes Federal Reserve emergency lending, FDIC resolutions, Treasury capital injections, or regulatory-facilitated acquisitions tied to solvency or liquidity issues. Current odds hover at 22%, reflecting muted concern but growing interest amid tariff war volatility.

Trump’s tariff push, despite a 90-day pause announced April 9, could pressure banks by disrupting trade-heavy clients and fueling inflation (projected CPI: 3.1% by Q3 2025 per Barclays). This may tighten Fed policy, raising borrowing costs and stressing loan portfolios, particularly for banks with $1.2 trillion in maturing commercial real estate loans (CBRE data). Conversely, tariffs might spur domestic lending if manufacturing rebounds, with Goldman Sachs eyeing a 2% industrial loan uptick. Federal Reserve choices—led by Chair Jerome Powell, alongside Treasury Secretary Scott Bessent, FDIC’s Gruenberg, and Comptroller Hsu—will shape risks. Persistent high rates (federal funds at 4.5–5%) could exacerbate $500 billion in unrealized bank losses (FDIC), while rate cuts (60% chance by September 2025, CME FedWatch and 21% chance we see 75 bps in cuts according to this market) might ease strains. This market, though nascent, signals early financial fragility as trade and monetary policies collide. Explore it!

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