President Donald Trump’s indication that he will not seek to remove Federal Reserve Chair Jerome Powell both has helped calm the market and lowered the odds that the U.S. will enter recession, according to Evercore ISI strategist Krishna Guha. Markets slumped Monday following another Trump broadside against the Fed last week and news over the weekend from National Economic Council Director Kevin Hassett that the administration was looking at legal analysis in removing Powell . But Trump on Tuesday stated he has “no intention” on removing Powell before the central bank leader finishes his term in May 2026. The surprise statement helped spark a rally on Wall Street as it seemed to tame one of several destabilizing factors that have roiled markets this year. “Whether this reflects Monday’s brutal foretaste of what would happen in markets if he did try to fire Powell, or was the plan all along, it is a clear positive, even recognizing the inevitable uncertainty as to whether Trump will stick to this position in tough moments ahead,” Guha, who is the firm’s head of global policy and central bank strategy, said in a client note. “It materially reduces the likelihood of worst case outcomes including stagflation and the morphing of the tariff crisis into a sovereign debt crisis, though these risks remain,” Guha added. Indeed, the possibility that Trump could take the unprecedented step of firing the Fed chair was just one of several factors to unnerve investors as of late. The president’s tariff policy is another issue, along with a general state of unrest in Washington and rising concern that pressure from a variety of fronts could push the U.S. into recession. Trump has called for interest rate cuts in the current environment, though that would be somewhat counterintuitive as businesses prepare for price increases from the tariffs. Powell and his colleagues largely have stuck to a position lately in which they won’t cut further until they have a better handle on the inflation impact from tariffs. “We would not rule out Trump becoming sufficiently enraged at Powell down the line to raise the possibility of firing Powell again later on,” Guha wrote. “In any event, Trump will have substantial ability to reshape the Fed in 2026 with likely multiple vacancies as well as the chance to appoint his pick for Chair. But for now this should fade into the background.” The Fed has a policy meeting coming up in two weeks, with markets placing a very low probability on the rate-setting Federal Open Market Committee adjusting rates. Traders do see the Fed cutting in June, but much can change between now and then, and a stubborn central bank could set off Trump again. However, Powell is only one vote on the 12-member Federal Open Market Committee . Few other central bankers have indicated any desire to cut anytime soon. “Trump will likely continue to position Powell to take the blame for the tariff-driven downturn and any recession that ensues,” Guha said. “But Powell can live with that.” Get Your Ticket to Pro LIVE Join us at the New York Stock Exchange! Uncertain markets? Gain an edge with CNBC Pro LIVE , an exclusive, inaugural event at the historic New York Stock Exchange. In today’s dynamic financial landscape, access to expert insights is paramount. As a CNBC Pro subscriber, we invite you to join us for our first exclusive, in-person CNBC Pro LIVE event at the iconic NYSE on Thursday, June 12. Join interactive Pro clinics led by our Pros Carter Worth, Dan Niles, and Dan Ives, with a special edition of Pro Talks with Tom Lee. You’ll also get the opportunity to network with CNBC experts, talent and other Pro subscribers during an exciting cocktail hour on the legendary trading floor. Tickets are limited!
