Analysis: Firing Powell Would Undermine Fed Independence, Potentially Trigger Economic Downturn

BlockBeats News, April 20th, Evercore ISI analysts stated that any attempt by the Trump administration to dismiss Federal Reserve Chairman Powell would "lead to a surge in stagflation trades," but the implementation of such a dismissal is "unlikely." The direction of the bond and forex markets indicates that the market has lost confidence in Trump's economic policies. However, there is currently no sign that the market has lost confidence in the Fed, as inflation expectations remain at low levels. Any move that undermines the Fed's independence would cause long-term yields to soar due to inflation risks, a sharp steepening of the yield curve, a sharp drop in the dollar, and a comprehensive rise in various risk premiums, including the stock risk premium, likely triggering a direct economic recession. (FX678)