Trump choked Powell "to fire you faster than cut interest rates", will the Fed's independence be affected and hit the market?

U.S. President Donald Trump has been plotting for months to remove Federal Reserve Chairman Jerome Powell, and yesterday publicly stated that he would fire him in exchange for interest rate cuts, a move that could seriously undermine the independence of the central bank, plant an uncertainty bomb for the market, and cause an investor outcry. (Synopsis: Unexploded bomb this summer: Trump has the right to "fire Powell" after May to control the US Federal Reserve to cut interest rates? (Background supplement: Ball crushed interest rate cut hopes + Huida chip was regulated, bitcoin fell back to 84,000, and U.S. stocks encountered another sharp sell-off) US President Trump has repeatedly discussed privately with his core advisory team in recent months to consider replacing the current Federal Reserve (Fed) chairman Powell before the end of his term, and reports indicate that Trump met with former Fed Governor Kevin Walsh to discuss the possibility of replacing Ball by Walsh, and the relevant discussions were even going on at Mar-a-Lago in Florida in February this year. Although Walsh himself has repeatedly urged Trump to respect Bauer's term (until May 2026) and avoid interference or dismissal, Trump's dissatisfaction with Ball is clearly boiling over. Yesterdayˋ (17) Trump publicly blasted Ball through his social media platform Truth Social, accusing him of failing to cut interest rates faster, calling it "always too late and wrong", and even saying in a surprising way: "The sooner Bauer's firing comes, the better!" , Trump even said directly to reporters in the Oval Office of the White House: If I want him (Bauer) to go, he will leave soon, trust me. I'm not happy with him (Bauer), he's playing politics. Policy divergence? The core of the conflict between Trump and Ball stems from the principle of interest rate policy, Trump hopes to stimulate the economy and reduce corporate borrowing costs by cutting interest rates sharply, especially when his high tariff policy may drag down the economy, and hopes that the Fed will play an "assist" role. However, Power believes that the Fed must be an independent body, insisting that policy decisions must be based on economic data analysis to achieve the two goals of "full employment" and "price stability" set by Congress, independent of short-term political needs. Ironically, Ball was originally nominated by Trump himself to be Fed chairman. In the face of Trump's repeated attacks and threats of dismissal, Power has repeatedly reiterated his legal position: The Fed president has a statutory term guarantee, and the president has no right to remove him from office unless there is a clear "for cause" such as malfeasance. "Our independence is a matter of law." He also made it clear that he would serve his full term, even if he was asked to resign by the president. Legal gray areas and Trump's style of challenging the system make the standoff uncertain. An ongoing case before the U.S. Supreme Court that could affect the president's authority to fire the head of an independent body adds to the uncertainty. Trump's blatant challenge to the independent functioning of the Federal Reserve has caused great concern on Wall Street and in global financial markets. Will Bauer's dismissal affect the market? The Fed's independence is not only an economics textbook principle, but also the cornerstone of more than 100 years of U.S. history, maintaining the stable functioning of financial markets and maintaining the global credibility of the dollar. An independent central bank can make decisions that are not dictated by election cycles or political interests and are truly conducive to long-term economic health, and once the market believes that the Fed may succumb to political pressure, it is likely to trigger a chain reaction to the collapse of the US credit system, which may go in three directions: US credit collapse hits bond markets: Markets will struggle to trust the Fed's policy guidance, leading to confusion in interest rate expectations, difficulty for companies to plan investments, and financial market pricing failures. Soaring market volatility: Uncertainty is the market's worst enemy. The shadow of political interference will cause risk premiums to soar, investor confidence to collapse, and may trigger a sharp sell-off in the stock market (e.g., S&P 500, Nasdaq) to hit portfolio values. Damage to U.S. dollar credibility: The Fed's independence is an important support for the U.S. dollar as a global reserve currency. If its credibility is damaged, it may shake the international status of the dollar, trigger capital outflows, and even trigger a wave of selling of US debt. Last week, Trump announced that the rise in U.S. bond yields in reciprocal tariffs has been considered by the market to be a problem at the level of the U.S. credit system, and the market is also eyeing safe-haven assets other than U.S. bonds, such as gold, which have hit new record highs one after another, and some experts predict that bitcoin may benefit, but before that, the first thing to determine is whether the tariffs will cause a significant recession in the economy, and if the economy declines, even if the hedging market comes, there is no guarantee that asset prices can maintain an increase. In any case, investors should focus more on geopolitics and current changes in the near term to survive this period of uncertainty in the overall global economy. 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