Trump’s Push to Fire Fed Chair Powell: 3 Major Risks That Could Backfire

Trump’s threats to fire Federal Reserve Chair Powell could trigger bond market chaos, dollar instability, and harm the U.S. economy. Here’s why experts warn it could backfire.

📰 Introduction

If President Donald Trump were to fire Federal Reserve Chair Jerome Powell, it could unleash economic chaos both in the U.S. and across global markets. While legal hurdles make this scenario unlikely, even rumors of Powell’s dismissal have already shaken investors.

Here are the three major ways Trump’s move to oust Powell could spectacularly backfire.

1️⃣ Mayhem for Bonds and Borrowing Costs

Trump’s repeated criticisms of Powell for not slashing interest rates fast enough may ironically backfire. If he attempts to remove the Fed chair:

Long-term yields could spike as investors lose confidence in the Fed’s independence.
Borrowing costs for American families and the U.S. government could soar.
The bond market might revolt, demanding higher yields to offset perceived political risks.

📈 On Wednesday, the yield on the 30-year Treasury jumped to 5.05%, its highest in over a month, after reports surfaced about Powell’s possible dismissal.

2️⃣ Market Turmoil & Dollar Instability

The U.S. dollar’s status as the world’s reserve currency relies heavily on institutional stability.

Removing Powell would create a “toxic mix for the dollar,” says FX strategist Francesco Pesole.
A weakened dollar could prompt foreign investors to flee U.S. bonds, exacerbating market volatility.
Stocks might see a short-term rally if a new Fed chair lowers rates, but inflation risks could quickly trigger a market crash.

Sen. John Kennedy warned, “If you fire the chairman of the Federal Reserve, you will see the stock market crash, and you will see the bond market crash.”

3️⃣ Reputational Damage to the Fed

The Fed’s credibility is its most powerful tool in stabilizing the economy. Undermining it could:

Make monetary policy less effective in fighting inflation or stimulating growth.
Cause higher grocery, housing, and loan costs for ordinary Americans.
Damage global trust in the U.S. economy, leading to long-term consequences.

“Undermining trust in the Fed for short-term political gain is a recipe for higher costs and lower living standards for all Americans,” warns Yale economist Ernie Tedeschi.

🚨 Why This Matters Now

Trump’s tariffs are already pushing up prices, and Powell’s leadership is crucial in preventing runaway inflation. Any move to fire him risks turning a delicate situation into an economic nightmare.