Capital Economics: Trump's firing of Powell would impact the market, and the new chairman is unlikely to lower interest rates as desired
Stephen Brown, Deputy Chief Economist for North America at Capital Economics, pointed out in a report that the market reaction on Wednesday indicated how investors might respond if Trump follows through on his threat to fire Federal Reserve Chairman Powell.
Brown stated that at that time, the dollar, stocks, and short-term bond yields could fall, while long-term yields might soar. Trump has dismissed reports of his attempts to fire Powell, calling it 'highly unlikely'.
However, the new nominee for chairman of the Federal Reserve is likely to be announced well before Powell's term ends in May 2026. Brown emphasized that even with a change in chairmanship, it is highly unlikely that the Federal Reserve would lower interest rates by 300 basis points as Trump has called for.