Trump Pauses on Powell Firing as Inflation Data Complicates Fed Path

President Trump has signaled a temporary truce in his conflict with the Federal Reserve, protecting the Greenback from an immediate institutional crisis. In an interview with Reuters, Trump stated he has “no plans” to fire Fed Chair Jerome Powell at this moment, though he notably refused to rule out future action, calling it “too early” to decide.

Institutional Independence Under Siege

The tension surrounds an alleged criminal investigation by the Justice Department into heavy construction cost overruns at the Fed's headquarters. Powell has defended his position, suggesting the probe is politically motivated retaliation for the central bank's refusal to lower interest rates on command.

For forex markets, the stability of the Fed's leadership is critical. Any move to remove Powell would likely trigger severe volatility in US Treasury yields and the USD, as investors would question the central bank's ability to fight inflation without political interference.

Macro Data: Sticky Inflation and Resilient Consumers

The political drama coincides with economic data that justifies the Fed's cautious stance:

• PPI & Retail Sales: November Producer Price Index (PPI) rose 3% year-over-year, while Retail Sales increased by 0.6%.
• The Beige Book: The Feds latest report shows economic activity increasing in most districts, though employment remains flat.

Analyst View: The combination of rising producer prices and robust consumer spending complicates the case for aggressive rate cuts. With the economy showing resilience, the “higher for longer” narrative remains in play, providing underlying support for the Dollar Index (DXY) despite the political noise.