Trump vs Fed's Jerome Powell: War of Words Sends US Markets into Bloodbath

Trump's strong words against Federal Reserve Chairman Jerome Powell triggered a broader fall in US equity markets on Monday. The Dow Jones Industrial Average plummeted over 1,100 points or more than 3%. While investors were already worried about trade war tensions owing to reciprocal tariffs, the recent criticism of Powell by Trump has raised concerns over the central bank's autonomy.

The US president said in a social media post that there is "virtually no inflation" and called the Fed chairman "Mr. Too Late."

"With energy costs way down, food prices (including Biden’s egg disaster!) substantially lower, and most other “things” trending down, there is virtually no inflation. With these costs trending so nicely downward, just what I predicted they would do, there can almost be no inflation, but there can be a SLOWING of the economy unless Mr. Too Late, a major loser, lowers interest rates, NOW," he said on Truth social.

The S&P 500 index took a similar trajectory and plummeted over 3.36% or more than 170 points. The tech-heavy index, Nasdaq dropped by nearly 600 points or 3.66% and was trading around 15,690 level. The CBOE volatility index surged over 19% during Monday's trading session to 35, signalling escalating investor fear resulting in a sell-off.

Not the first time

This is not the first time Trump has so aggressively criticised Powell. Earlier this year, he slammed the central bank for failing to control inflation levels.

“Because Jay Powell and the Fed failed to stop the problem they created with Inflation, I will do it by unleashing American Energy production, slashing Regulation, rebalancing International Trade, and reigniting American Manufacturing,” he wrote in a social media post in January month.

These war of words have now increased concerns around prospective uncertainty, making the overall outlook even more complex and blurry. This was visible in the US stock market's trajectory with Wall Street witnessing a bloodbath on Monday. So far this year, the S&P 500 index has dropped 750 points or 12.7% with some analysts even estimating that the US economy might fall into a recession.