President Says He Won’t Try to Fire Powell

Yield reverse course, equities surge in a risk-on session. After several weeks of yield curve steepening, the short end of the curve rose 1-6 bps and the long end fell 1-3 bps today. The move was driven by Treasury Secretary Bessent’s assertion that the US and China will have to de-escalate their trade tensions, as well as President Trump’s assurance that he will not fire Chair Powell. Both headlines cleared some uncertainty surrounding policy, the potential for a recession, and the Fed’s power and independence. Equities soared on hopes that global trade tensions will ease, with the S&P 500 and NASDAQ up 2.51% and 2.71%, respectively. 

IMF slashes 2025 global economic growth forecasts. After the International Monetary Fund forecasted 2025 global GDP growth to be 3.3% in January, a revision released today placed the estimate at just 2.8%. That would be the slowest rate of expansion since COVID in 2020 and the second-lowest level since 2009. IMF Chief Economist, Pierre-Olivier Gourinchas, said today that “We are entering a new era… the global economic system that has operated for the last 80 years is being reset.” The U.S. saw the biggest downward revision amongst advanced economies, now expected to grow just 1.8% in 2025, a 0.9% cut versus January’s 2.7% estimate.

Positive news from the White House. Today, President Trump appeared to draw a line in the sand regarding his recent public criticism of Fed Chair Powell, which had led some to believe he was seriously considering measures to remove Powell or undermine his authority. Trump told reporters, “No, I have no intention of firing him,” but added that he would like him to “be a little more active in terms of his idea to lower interest rates.” The President has been vocal about his disagreement with Powell’s stance on the pace of future interest rate cuts, and today’s pivot comes only days after he said on social media that “Powell’s termination cannot come fast enough.”

Secretary Bessent also made headlines today, when he said in a private summit that the escalating trade war with China is unsustainable for both sides, and that de-escalation will be necessary and should happen very soon. President Trump followed up Bessent’s comments later today, saying that he pledged to “be very good to China” and that “they have to make a deal.”