Macroeconomic expert Nouriel Roubini, commonly referred to as “Dr. Doom,” has pushed back against President Donald Trump’s verbal jabs at Fed Chair Jerome Powell, and his escalating attacks on the Federal Reserve’s autonomy, amid demands for a preemptive rate cut.
What Happened: On Tuesday, Roubini’s post on X criticized Trump’s taunts and insults aimed at the Federal Reserve Chair, calling it a “clumsy blame game,” which he believes is the only “semi-rational explanation” for the president’s recent behavior.
Roubini believes that Trump is now setting the stage to blame Powell and the Federal Reserve for the coming slowdown in growth and recession, resulting from his administration’s tariffs.
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He said that Powell alone cannot cut interest rates, since it has to be voted on by a majority of the Federal Open Market Committee (FOMC). The FOMC is not going to cut interest rates, he says, because inflation will begin rising again once the tariffs start to kick in.
Roubini added that Trump is “shooting himself in the foot” by floating the idea of firing Powell, noting that the markets slid in response, with bond yields and credit spreads surging and the dollar continuing to weaken, a move he described as “a repeated own goal.”
“If [the] Fed were to blink and cut short policy rates, the bond yields would go much higher, and equities lower as [the] Fed would be behind the curve in anchoring inflation expectations at a time of inflationary tariffs,” Roubini says, adding that Powell is, in effect, helping Trump by “not blinking.”
Even if Trump were to fire Powell, likely after winning a Supreme Court battle that rules in his favor, Roubini believes that this would be a “pyrrhic victory,” as it would lead to “de-anchoring of inflation expectations,” which means that the market’s inflation expectations will start to drift, ultimately leading to higher bond yields.
Why It Matters: Trump has since walked back on his comments regarding firing Powell, saying that he had “no intention,” and that he “never did,” leading to a rally in the markets, the Dollar, and the Treasuries.
Roubini has been a vocal critic of Trump’s tariffs since the beginning, referring to the term “Liberation Day” as “Orwelian Double-Speak,” while adding that tariffs would only lead to “lower growth and higher inflation.”
He has also repeatedly warned that the markets were delusional about the Federal Reserve’s willingness to step in, calling it a “three-way game of chicken” between Trump, Powell, and Chinese President Xi Jinping, with Trump being most likely to blink first.
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