Analysts warn that dismissing Federal Reserve Chair Jerome Powell could lead to a $60 billion increase in interest costs for the U.S. government.
Analysts' Warnings About Potential Costs
According to estimates, firing Powell may trigger an increase in Treasury yields, raising the government's spending amid growing inflation and political uncertainty. Gennadiy Goldberg from TD Securities noted that removing the Fed Chair could add roughly $58 billion to annual interest costs.
Expected Influence on Treasury Yields
Goldberg added that long-term Treasury yields might rise by 20-50 basis points, pushing 20- and 30-year securities toward about 5.5%. This assessment only accounts for 20- and 30-year bonds and does not include other maturities like 10-year notes, which could also face rising rates.
Political and Financial Risks of Dismissing the Fed Chair
Removing the Fed Chair could also spark bets on increased political instability and looser fiscal spending. Alex Everett, a fund manager at Aberdeen, emphasized that higher Treasury yields would likely negatively impact the dollar. This situation coincides with rising interest outlays, now about 3.2% of federal expenditures, projected to rise to approximately 6.1% by 2054 if Trump's budget proposals are enacted.
Overall, the dismissal of the Fed Chair could have significant financial repercussions, including increased interest costs for the government and potential negative effects on the economy and the dollar.
