Trump’s Threat to Fire Powell Could Torch U.S. Credibility—And Markets Along With It

Fed Chair Jerome Powell finds himself in the crosshairs—again. This time, it's not inflation hawks or dovish Democrats gunning for him. It's a former president with a penchant for market-moving tantrums.

Why the Fed's independence matters

Central bank autonomy isn't some bureaucratic technicality—it's the bedrock of monetary policy credibility. When politicians meddle with interest rates, investors start pricing in political risk alongside economic fundamentals. That's when things get ugly.

The Powell paradox

Ironically, Powell's sin might be doing his job too well. Taming inflation without triggering a recession should earn him praise—not a pink slip. But in today's hyper-politicized climate, even textbook monetary policy becomes partisan ammunition.

Markets hate uncertainty more than high rates

Wall Street could stomach another 50bps hike if it came with forward guidance. But a politicized Fed? That's the kind of uncertainty that sends VIX spikes through the roof and Bitcoin maximalists into smug 'I-told-you-so' mode.

The bottom line: When central bankers start worrying about job security instead of employment figures, everyone loses—except maybe crypto bros and gold bugs.

Analysts say markets would tank and lawsuits would follow

Wolfe Research’s Tobin Marcus and Chutong Zhu said the firing would almost certainly trigger an equity selloff and push long-term bond yields up sharply. Why? Because it’d signal that the Fed isn’t independent anymore, and investors hate that.

The legal fight would be immediate. If Trump tried to force Powell out, the Fed Chair would likely sue. Wolfe Research said as much: “If Trump moves to actually fire Powell rather than just pressure him to resign, Powell would presumably sue to stop it.”

They also raised the possibility that Powell might be temporarily sidelined during the court fight. In other words, even if he ends up winning, the markets would still have to operate without a Fed Chair for months.

This wouldn’t be Trump’s first battle against the heads of independent agencies. Wolfe pointed out that during Trump’s second-term firings, multiple agency commissioners sued after being removed. None of them won.

But here’s the thing: Powell isn’t just a commissioner. He’s the head of the most powerful central bank on earth, a whole different level of power. That is definitely enough to change the legal playing field.

Critics warn that credibility and inflation control would collapse

Roger Altman, Evercore founder and former deputy Treasury secretary under Clinton, didn’t mince words. He called the idea of firing Powell “dreadful.” Speaking on CNBC, Altman said, “There are a lot of bad ideas out there. But the president firing the chairman of the Fed… that’s among the worst ideas.”

His reasoning is simple: independent central banks work, political ones don’t. He pointed to Turkey and Argentina, where leaders control the central banks and inflation is out of control.

Roger also doubted that Powell would willingly step down. “I don’t think Chairman Powell would accede to a request that he leave,” he said. That means the legal path is probably unavoidable — and likely messy.

Even Jim Cramer jumped in. After watching markets MOVE on the firing rumors, he said, “I hope today is the last day that Trump goes after Jay Powell.” He added, “Gunning for Powell will only hurt Trump, the same way it hurts the markets.”

Jim pointed out that Powell’s term ends in ten months, so really Trump could just wait. Markets were rattled. The Dow finished up 0.53%, the S&P gained 0.32%, and the Nasdaq ROSE 0.26%. But don’t let the green fool you, there was serious concern all day that Trump might actually pull the trigger this time.

Jim summed it up like this: “What’s in it for President Trump if he tries to fire Powell? I think we saw it today: nothing. The stock market would get rocked. Long-term interest rates would rise. What president would want that to happen?”

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