Powell Will Likely Wait Until Trump Makes First Move, Says 'Dr. Doom' Roubini
Roubini, nicknamed Dr. Doom for his predictions of the 2008 financial crisis, cautions against relying too much on the Fed to quickly resolve market instability.
Author: Omkar Godbole | Edited by: Sheldon Reback Updated: April 9, 2025, 5:45 PM Published: April 9, 2025, 9:40 AM
Key points:
- Roubini told Bloomberg that traders hoping for quick Fed intervention could be disappointed.
- The economist notes that inflation could prove persistent, which would reduce the attractiveness of long-term bonds.
Nouriel Roubini, the economist who predicted the 2008 global financial crisis and earned the nickname Dr. Doom, warned traders against relying too much on the Federal Reserve to quickly resolve the financial market instability caused by President Donald Trump's tariffs on international trade.
Last week, Trump announced massive tariffs on a number of countries, including a massive levy on imports from China that now stands at 104%. Financial markets tumbled on fears the move could tip the U.S. and other economies into recession.
The Nasdaq 100 has lost 12%, and Bitcoin (BTC), the largest cryptocurrency by market cap, has fallen 10%, falling below $75,000 at one point. Volatility in the U.S. Treasury bond market has spiked, with long-term bond yields rising significantly, pushing their prices lower despite the stock market rout. That has raised fears of a full-blown dollar liquidity crisis similar to the one seen five years ago during the COVID pandemic.
There are rumors that the Federal Reserve will soon take steps to ease liquidity conditions, as it did in 2020 by setting asset price floors. Traders expect Powell to announce at least five quarter-point rate cuts this year, according to CME's FedWatch tool. But Roubini doesn't think that will happen.
“There is certainly a game of chicken between the Trump put and the Powell put. But I would say the strike price of the Powell put is going to be lower than the strike price of the Trump put, which means Powell is going to wait until Trump makes a move,” Roubini told Bloomberg.
In other words, Powell will likely wait for Trump to tone down his rhetoric before stepping in to stabilize market volatility. That approach makes sense, since much of the current market volatility is caused by Trump’s tariffs.
The situation could change dramatically if Trump teases a potential trade deal or talks with China on social media. An episode earlier this week is proof of that. On Monday, an unconfirmed report of a tariff suspension sent market valuations soaring, only to be later debunked as false.
High inflation but no recession
Roubini, who runs Roubini Macro Associates, predicts that inflation will be persistent in the new world of higher tariffs, which will weigh on long-term bonds. That partly explains the fall in prices of 10- and 30-year U.S. Treasury bonds and the subsequent rise in their yields.
At the same time
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