US President Donald Trump’s threat to remove Jerome Powell as Federal Reserve Chairman could lead to a swift and brutal market reaction, according to Deutsche Bank researcher George Saravelos. The chances of this event occurring are estimated at 19% by Polymarket.
If Powell is ousted, the currency and bond markets could collapse due to inflation expectations increasing and real yields dropping, Saravelos warned in his note. This would have severe consequences for the global economy, with a sharp fall in the value of the US dollar being the first warning sign.
The situation would be similar to what happened in Türkiye, where President Recep Tayip Erdoğan maintains control over the Central Bank, leading to high inflation rates. Saravelos believes that Trump’s fixation on lower interest rates could lead to significantly greater global disruption than during the 1970s stagflation under Nixon and Arthur Burns.
A removal of Powell would also have a significant impact on US fixed income markets, with a 30-40bps sell-off expected on the first day of announcement. The correlation between the bond market and the dollar would turn sharply positive, both down.
Source: https://fortune.com/2025/07/14/trump-fire-fed-powell-currency-bond-market-collapse-deutsche-bank