Bloomberg Intelligence Instant Reaction: Trump Reportedly Considers Firing Fed Chair Powell
Jul 16, 2025
Ira Jersey, Chief U.S. interest rate strategist, and Chris Condon, Bloomberg’s Federal Reserve team leader, delve into President Trump's contemplation of firing Fed Chair Jerome Powell. They discuss potential upheavals in financial markets and the ensuing legal complexities. The conversation highlights the ramifications on bond markets and interest rates, illustrating the delicate balance between political influence and the Federal Reserve’s independence. Insightful analysis on potential successors and historical context enriches the debate on monetary policy stability.
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Market Reaction to Powell Removal
- Removing Fed Chair Powell would likely cause a twist steepening of the yield curve with higher long-term yields and lower short-term rates.
- The chair can influence policy, but decisions require committee consensus, limiting drastic rate changes from one person.
Importance of Fed Independence
- Central bank independence tends to produce better long-term economic outcomes than politically influenced central banks.
- A politically loyal Fed chair could cause higher long-term yields and increased borrowing costs, affecting mortgages and auto loans.
High Legal Hurdle to Fire Powell
- The legal standard for removing a Fed Chair requires "cause," such as inefficiency, neglect of duty, or malfeasance.
- This is a high legal hurdle, making firing Powell difficult despite political pressure.