The greenback hit a three-year low as speculation intensified that the president will announce the Fed chair's successor sooner than expected
Donald Trump is once again targeting the Federal Reserve’s leadership, this time hinting at a pre-emptive move to replace Fed chair Jerome Powell as he criticizes the central bank’s reluctance to cut interest rates.
The president, frustrated by the Fed’s reluctance to lower rates, told reporters during the NATO summit in Europe that he is considering “three or four” possible successors to Powell, whose current term ends in May 2026.
“I know within three or four people who I’m going to pick,” Trump said, calling the Fed chair, was "an average-minded person" with a "low IQ for what he does."
"I think he's a very stupid person, actually," Trump added.
The dollar tumbled to a three-year low on Thursday morning as speculation rose that Trump will announce a replacement for Powell ahead of schedule.
According to a Wall Street Journal report, Trump is weighing the announcement of Powell’s successor as early as September or October, even though Powell’s term does not expire until May of next year.
The candidates rumored to be under consideration are all seen as Trump loyalists and include former Fed Governor Kevin Warsh, National Economic Council head Kevin Hassett, current Fed Governor Christopher Waller, and Treasury Secretary Scott Bessent.
Hassett declined to comment directly when asked whether he had discussed a Powell replacement with the former president.
“I think the President will choose the person that he likes, and it’s not going to be Jay Powell,” Hassett said at a White House event.
While Trump has previously floated the possibility of removing Powell, he recently stated, “I’m not going to fire him,” walking back earlier threats.
Still, some analysts interpret Trump's remarks as an effort to influence monetary policy in advance, with one describing it as the creation of a “shadow” Fed chair ahead of the term’s end in May 2026.
Despite Trump’s barrage of insults and threats, replacing the Fed chair is no simple task. Federal Reserve leaders have historically been protected from political dismissal unless misconduct is proven. Legal precedent, including a Supreme Court ruling, restricts presidents from firing Fed chairs over policy disagreements.
Still, the president’s comments have rattled markets. The US dollar weakened following his remarks, with the US Dollar Index (DXY) falling to a three-and-a-half-year low of 97.60 in early European trading Thursday. Concerns around Fed independence and political interference have also added downward pressure on the greenback.
Meanwhile, Powell warned Congress this week that recent tariff increases could drive inflation higher, complicating the central bank’s decision-making on rate cuts.
Read more: We're in no rush to cut rates: Powell
Financial markets have now priced in nearly a 25% probability of a rate cut at the upcoming July Fed meeting, up from just 12% a week ago, according to CME’s FedWatch tool. Traders are awaiting key US economic data, including Q1 GDP, Durable Goods Orders, the Chicago PMI, Pending Home Sales, and weekly Initial Jobless Claims, for further signals.
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