Recently, U.S. President Trump has frequently voiced his dissatisfaction with the current Federal Reserve Chairman Powell, expressing that "his dismissal hasn't come soon enough," statements that have quickly resonated with rare agreement and warnings in international financial and political circles. Market analysts indicate that this move not only shakes the fundamental principle of the Federal Reserve's independence but could also fundamentally undermine the global trust system in the dollar.
Rare French Official Warning: Dollar's Credibility on the Brink of Danger
French Finance Minister Eric Lombard recently stated publicly that if Trump really proceeds to dismiss Powell, it would cause "serious credibility damage" to the dollar and might trigger "systemic chaos" in the U.S. economy. He bluntly claimed that Trump's aggressive actions regarding tariff policies have already undermined the dollar's stability as an international reserve currency, "and if Powell is also ousted, it would be the last straw breaking the dollar's credibility."
Lombard pointed out two immediate consequences of such actions: First, a significant increase in U.S. debt-servicing costs; second, a drastic decline in global capital markets' confidence in U.S. economic stability, possibly forcing America back to the negotiating table seeking stability.
What's more noteworthy is that Lombard is not alone. Although French President Macron has frequently clashed with Trump on Ukraine, research funding, and environmental issues over the years, his finance minister making such a candid warning about U.S. internal affairs is rare in the context of international diplomacy.
Simultaneous Reactions from Within and Outside the Fed: Warning of Serious Consequences from Weakening Independence
Not only in international politics, but also domestically in the U.S., voices from within the Federal Reserve are expressing strong discontent. Chicago Fed President Goolsbee warned: "If the Fed's independence is politically interfered with, it will weaken the central bank's credibility and could lead to higher inflation, slower growth, and worse employment performance."
He emphasized that virtually all global economists agree that central banks' freedom from political influence is a necessary prerequisite for achieving stable policy goals, "Once monetary policy is politicized, the cost is systemic risk borne by the whole society."\p>
Meanwhile, dissent from Congress is also gradually rising. U.S. Senate Banking Committee member, Republican Senator John Kennedy, unusually expressed strong support for Powell. He stated: "Powell is not someone who compromises easily; he will do what he thinks is right and won't let inflation run wild like a March hare. His fighting spirit is incredible (tiger blood)."
Market Perspective: Unhedgeable "Political Risk" Raises Systemic Concerns
Analysts broadly believe that this "firing Powell" incident is different from typical policy disputes; it's not a risk category that can be hedged through traditional financial instruments but is an "unquantifiable political uncertainty."
Once such risks are priced by the market, they could impact the dollar's status as a "benchmark asset," thereby disturbing a series of key asset variables, including U.S. Treasury yields, gold prices, and even global capital flows. The dollar's solid position as a reserve currency is based on institutional trust in the Federal Reserve's neutrality, which is currently being eroded.\p>
Conclusion: Trump's Political Pressure May Trigger Cracks in Dollar's Credibility
As Trump continues to pressure Powell, the market is not just evaluating the direction of monetary policy but is increasingly aware of a critical issue: Can the Federal Reserve still remain independent? If the President arbitrarily influences the central bank's leadership, it will have profound impacts on the U.S. financial system and might cause the dollar to lose its "last stronghold" in the international monetary system.
In a globally increasingly fragile financial chain, such unquantifiable political risks might become the largest gray rhino for future markets.
