Bloomberg with the report from Deutsche Bank strategist George Saravelos, warning that financial markets are downplaying the risk of Trump removing Federal Reserve Chair Jerome Powell — a move that could significantly shake markets.
Bloomberg is gated, but in brief:
- DB argue that markets are largely ignoring the risk, citing Polymarket showing less than a 20% chance of Powell being ousted
- warn that if Powell is forced out, the U.S. dollar could fall 3–4% and Treasury yields could jump 30–40 basis points within a day
- firing Powell would be seen as a major blow to Fed independence, raising long-term concerns about political interference
- How markets respond over the longer term would depend on Trump’s nominee to replace Powell, the response from other Fed officials, and broader economic conditions
- warned that the U.S.’s weak external funding position could amplify market volatility beyond the initial shock.
***
The background to all this, ICYMI, is most recently Trump called for Powell’s immediate resignation if allegations about misleading Congress over Fed building renovations prove accurate. Powell pushed back, defending the Fed’s independence and calling parts of the reports on the renovations “flatly misleading.” He also made clear he would not resign if asked by Trump.
Later this year,
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