After months of avoiding conflict, Powell finally struck back against Trump’s long-term political pressure!

After months of cleverly avoiding confrontation with U.S. President Trump, Federal Reserve Chair Powell is now striking back.

During the Q&A session on Wednesday local time, Powell depicted the chaotic implementation of tariffs as actions clearly detrimental to the economy, criticizing the methods employed by the Department of Efficiency and legally defending why he believes he can withstand any attempts by Trump to fire him.

As concerns over the Fed's independence continue to rise, Powell indicated that he would focus on the central bank's core objectives and strive to maintain that goal, which is good for all of us.

Let’s start with Powell defending the independence of the Federal Reserve.

Powell said at the Chicago Economic Club, 'Our independence is a legal issue,' clearly countering a president who often tries to bully the central bank on social media and has already begun to test the independence of other agencies.

Before making these remarks, Chief Justice John Roberts allowed Trump to continue firing senior officials at other agencies—some believe this situation set the stage for the more market-focused debate over whether Trump could fire or demote Powell. He said he does not believe this case would apply to the Federal Reserve; he would never bow to external forces.

Powell stated, 'We will never be influenced by any political pressure. People can say whatever they want, and that’s fine. That’s not the problem. But we will act strictly according to our own will, regardless of politics or any other external factors.'

In a conversation with former Indian central bank governor Raghuram Rajan, Powell remained calm and did not directly criticize Trump. However, his candor was clearly at odds with the approach of this central bank governor, who generally avoided commenting on White House policies and turned a blind eye during public attacks from Trump.

As Powell made these remarks, concerns over the independence of the Federal Reserve began to subtly permeate market discussions.

Moreover, Trump's trade policy could potentially place the Federal Reserve in an impossible position—essentially trying to manage the risks posed by its dual mandate of stabilizing prices and the labor market.

Powell did not shy away from stating that the ever-changing tariff plans could push U.S. import tariffs to their highest point in a century—depending on which day of the week you decide to calculate those numbers. He said that if clarity does not return in the future, businesses and investors might withdraw their investments.

He said, 'If the United States becomes a jurisdiction with structurally higher risks, it will reduce our attractiveness as a jurisdiction. We don’t know that yet, but I think that’s the impact.'

He also expressed concerns that cuts to research funding could 'impact economic growth, productivity, health, and a variety of things.'

He is well aware of the constraints tariffs impose on the Federal Reserve. He said, 'The impact of (the policy) is likely to divert us from our goals. As economic growth slows, the unemployment rate is likely to rise, and with the imposition of tariffs and some tariffs being paid by the public, the inflation rate is likely to rise. Thus, this possibility is significant.'

He said the Fed's 'obligation' is to maintain long-term price expectations. Economists tend to believe that inflation expectations are a self-fulfilling prophecy.

Powell also relaxed his usual commitment to avoiding comments on fiscal policy, making remarks equivalent to a blatant criticism of the Department of Efficiency, which symbolizes Trump donor Elon Musk's iconic cost-cutting measures that ultimately became tools for cultural wars and resolving partisan grievances rather than for streamlining the budget.

As Powell correctly pointed out, Social Security, Medicare, and Medicaid occupy an overwhelming and growing share of the budget, and only through reforming welfare can any government make meaningful progress on spending.

Powell stated, 'When people focus on cutting domestic spending, they are not actually addressing the problem. Discretionary domestic spending (as a percentage of federal spending) has been declining. I like to point this out because much of the dialogue provided by politicians is about discretionary domestic spending, and that is not where the issue lies.'

Ultimately, I believe Powell's audacity will prove to be an asset for the economy and the markets during a period of significant decision-making turmoil.

On Wednesday, Powell's remarks seemed to deepen the decline of the S&P 500 index, with some traders focusing on his cautious stance on rate cuts in response to tightening financial conditions, which was somewhat perplexing.

In the medium term, investors need to know that the U.S. central bank remains committed to achieving maximum employment and price stability, even if it needs to fight for its ability to do so. So far, market volatility does not belong to either of these situations.