(The Hill) — President Donald Trump has backed off of his threats to fire Federal Reserve Chair Jerome Powell — for now.

Last week, the president seemed to hit a breaking point with Powell when he informed Republican lawmakers of his intention to possibly remove the Fed chair. However, he has since retreated from this stance, as both officials and external commentators have cautioned about its potential effects on the markets.

Similar to his behavior with tariff threats — which led to the creation of the Wall Street TACO trade, an acronym for “Trump Always Chickens Out”— he suggested the possibility of dismissing Powell and then reconsidered.

“This is somewhat akin to the situation after ‘liberation day’… when we had a crucial moment for capital markets, affecting the stock and bond markets, where [Treasury Secretary] Scott Bessent advised the president, ‘Hey, we need to manage this.’ I believe the Jerome Powell situation is quite similar,” a source with close ties to the White House stated.

Trump indicated to Republicans during a meeting in the Oval Office that he plans to fire Powell, a senior White House official told The Hill, and markets quickly dipped, with the S&P 500 falling into the red. He said later that day it is “highly unlikely,” but he doesn’t “rule out anything.”

Some experts have since warned not to jump in on the Fed chair, while legal scholars don’t believe Trump has the authority to even oust Powell unilaterally.

“The Fed independence is what gives America its position as the No. 1 place to invest on Earth. So, it would be very, very difficult to have presidents firing Feds. That would not be taken well by the markets, and I think Trump knows that,” investor Kevin O’Leary said in an interview on Fox News’s “America Reports.”

Former Treasury Secretary Lawrence Summers warned about the future of the Fed and what precedent Trump could set with continued pressure on Powell.

“The idea that allowing himself to be forced out would somehow make Jay Powell be serving the interests of the independence of the @federalreserve is, I think, very wrong,” Summer wrote on the social platform X. “If the Fed chair became a rubber stamp subject to presidential diktat, I think we would have lost the independence of the Federal Reserve on monetary policy.”

The president said Tuesday he doesn’t think Powell should resign before his term is up in May but bashed him for not lowering interest rates amid uncertainty over what impact his tariff policy will have on the economy.

“I think he’s doing a bad job, but he’s going to be out soon anyway. In eight months, he’ll be out,” the president said.

Bessent on Tuesday morning also expressed his support for Powell making his own decision on his role.

“There’s nothing that tells me that he should step down right now,” Bessent said on Fox Business’s “Morning with Maria.”

“His term ends in May. If he wants to see that through, I think he should. If he wants to leave early, I think he should.”

Former Federal Reserve chairs Ben Bernanke and Janet Yellen also publicly condemned Trump’s pressure campaign against Powell, warning in a Monday op-ed in The New York Times that it could fuel inflation.

But, Trump has been pressuring Powell for months to raise interest rates, berating him on Truth Social, when talking to reporters and in speeches on various topics.

“The market was not able to brush the Powell-firing news off because it was believable Trump would,” analysts at LH Meyer Monetary Policy Analytics wrote in a Monday research note.

“In fact, it might have given the wrong impression that actually firing Powell would not be catastrophic. The market was thrown off balance, but not in turmoil. Inflation expectations ticked up some. So the fear of a market meltdown might not be there to deter,” they continued.

“Still, firing any Fed governor would simply cause a twist steepening, exacerbating not helping debt service expense.”

The president has urged the Fed to cut rates by amounts only seen during economic crises, even with unemployment close to record lows, while few, if any, economists outside the administration have supported Trump’s call.

“That’s why I call him too late. T-o-o, too late,” Trump said Tuesday. “And it’s really too bad. But it is affecting people that want to buy houses and that shouldn’t happen.”

A longtime lobbyist said Trump’s ongoing threats on Powell, while backing off of firing him, are a combination of “testing the waters to see how bad the backlash would be, his strong desire to get rates lowered [and] him working the refs — hoping to bully Powell and future chairs.”

Rep. Jim Himes (D-Conn.) said Sunday that a White House insider is warning Trump of a “massive market reaction” if he fired Powell. And, The Wall Street Journal reported that Bessent personally sought to talk Trump out of trying to fire Powell, although the president slammed the report.

Trump said “nobody had to explain” to him that firing Powell would be bad for markets.

“If it weren’t for me, the Market wouldn’t be at Record Highs right now, it probably would have CRASHED! So, get your information CORRECT. People don’t explain to me, I explain to them!” the president wrote on Truth Social.

The source close to the White House said Trump has taken note that Wall Street has been shaken by his threats on Powell.

“A lot of Wall Street types were very concerned about this, and I think that’s something that resonates for the president and piques his interest,” the source said.

“Common sense and cooler heads are prevailing. I don’t think that’s going to stop the president from trying to use Jerome Powell as a foil for whatever the topic change of the day is. He uses these fights in order to change subjects quite often, and I think that’s what you probably see,” the source added.

The stock market has rallied in the days since Trump backed off on Powell, with the S&P 500 index hitting another record close Tuesday.

The Dow Jones Industrial Average was up 0.4 percent by the closing bell, while the Nasdaq composite fell 0.4 percent and closed with a loss for the first time in seven trading days.