Trump will be hit with $60bn bill if he sacks Powell
Ousting Mr Powell, the head of the US central bank, would send Treasury yields soaring, adding crippling costs to the government's debt interest bill as investors bet on the prospect of higher inflation and political instability.
Gennadiy Goldberg, the head of US rates strategy at TD Securities, said that if Mr Trump did oust the Fed Chair, it would add around $58bn to the government's interest bills.
The president suggested this week that he could sack Mr Powell over escalating costs in the $2.5bn renovation of the central bank.
After a flurry of reports warned that Mr Trump was preparing to oust the Fed chairman imminently on Wednesday, the president told reporters: 'I don't rule out anything but I think it's highly unlikely unless he has to leave for fraud.'
Mr Trump has been deeply critical of Mr Powell, who he has called a 'numbskull' for not cutting interest rates as the president wants.
If Mr Trump were to remove the Fed chairman, analysts warned bond investors would demand far higher rates to compensate for fears that the Fed would no longer operate free from government interference and would be less able to keep inflation under control.
Mr Goldberg said this would drive up yields on American debt repayable in 20 years and 30 years by between 20 and 50 percentage points, potentially pushing interest rates on these bonds to around 5.5pc.
In turn, this would add $58bn to the interest bill on the $276bn in 30-year Treasuries and $168bn in 20-year Treasuries that the US issues in a typical fiscal year, Mr Goldberg estimated.
This calculation assumes that yields stay at these levels and that government debt issuance patterns remain the same.
'If interest rates jump, the debt burden could very quickly become unsustainable,' said Mr Goldberg.
Alex Everett, a fund manager at Aberdeen, said that over the course of two or three months, the shock could add as much as a whole percentage point to 30-year Treasury yields, pushing the interest rate on these bonds to 6pc.
This would be the steepest rise in US Treasury yields since the 'Volcker shock' in the early 1980s when Paul Volcker, the then-Fed chairman, made large increases in interest rates to tame runaway inflation.
Mr Everett said: 'The difference then was that yields moved higher to reflect a Fed combating inflation. This time they'd likely be moving higher to reflect a Fed not combating inflation effectively.
'[Markets will think] inflation will not be kept under control by an institution that exists to moderate the economy.'
Sacking a Fed chairman would also push markets to make bets on more political instability and unchecked borrowing.
'It would be a very key progression point in Trump's agenda, you'd assume the next logical step is that he can push harder on other things,' Mr Everett said.
The surge in Treasury yields would be accompanied with a significant drop in the dollar that would hit investors hard, he added.
Higher borrowing costs would hit at a time when the government's debt interest bill was already forecast to soar from 3.2pc to 6.1pc by 2054, assuming the measures in Mr Trump's spending bill come to pass, according to analysis by the Committee for a Responsible Federal Budget.
Higher Treasury yields would also drive up mortgage rates, which are currently close to 7pc, further slowing housing market activity, at a time when sales are already at a 30-year low.
Broaden your horizons with award-winning British journalism. Try The Telegraph free for 1 month with unlimited access to our award-winning website, exclusive app, money-saving offers and more.
Hashtags

Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Yahoo
6 minutes ago
- Yahoo
DIVIDEND ALERT! Iridium Communications (IRDM) Nosedives 22% on Disappointing Earnings, Outlook
We recently published . Iridium Communications Inc. (NASDAQ:IRDM) is one of the worst-performing stocks on Thursday. Iridium Communications fell by 22 percent on Thursday to close at $25.26 apiece as investors soured on its disappointing earnings performance and lowered growth outlook. In a statement, Iridium Communications Inc. (NASDAQ:IRDM) said net income in the second quarter of the year dropped by 32 percent to $21.97 million from $32.34 million in the same period last year. Net income for the first six months also finished flat at $52 million. On the other hand, total revenues increased by 8 percent to $216.9 million from $201 million year-on-year. Looking ahead, Iridium Communications Inc. (NASDAQ:IRDM) lowered its total service revenue growth expectations to a range of 3-5 percent, compared with the 5-7 percent growth guidance previously. Copyright: limonzest / 123RF Stock Photo Despite the dismal earnings, Iridium Communications Inc. (NASDAQ:IRDM) declared a higher cash dividend to its investors for September, amounting to $0.15 per common share. This compares with $0.14 cash dividend in the second quarter of the year. While we acknowledge the potential of IRDM as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an extremely cheap AI stock that is also a major beneficiary of Trump tariffs and onshoring, see our free report on the .
Yahoo
6 minutes ago
- Yahoo
C3 AI (AI) Loses 10.8% as CEO Steps Down
We recently published . Inc. (NYSE:AI) is one of the worst-performing stocks on Thursday. C3 AI snapped a two-day rally on Thursday, losing 10.84 percent to close at $26 apiece as investors repositioned portfolios following its chief executive's announcement that he was stepping down from his post. In a statement, Inc. (NYSE:AI) said that CEO Thomas Siebel has tendered his resignation due to health reasons, effective upon a successor assuming his post. 'After being diagnosed with an autoimmune disease in early 2025, I have experienced significant visual impairment,' he said. 'For C3 AI to reach its full potential—which I believe is spectacular—the board and I have initiated a search for a new CEO who can take the company to the next level of growth and success. I will remain fully engaged as Chief Executive Officer of until such time as the board appoints my successor, after which I will continue in the role of Executive Chairman, focusing on strategy, product innovation, strategic partner and customer relationships,' he noted. Meanwhile, an analyst from Wedbush said that the chief's resignation presented an opportunity for other firms to acquire Inc. (NYSE:AI). Wedbush gave Inc. (NYSE:AI) an 'outperform' rating and a price target of $35 apiece. While we acknowledge the potential of AI as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an extremely cheap AI stock that is also a major beneficiary of Trump tariffs and onshoring, see our free report on the .
Yahoo
6 minutes ago
- Yahoo
Chipotle Mexican Grill (CMG) Slashes 13% on Disappointing Q2, Outlook
We recently published . Chipotle Mexican Grill, Inc. (NYSE:CMG) is one of the worst-performing stocks on Thursday. Chipotle Mexican Grill fell by 13.34 percent on Thursday to close at $45.74 apiece as investors digested a mixed earnings performance and weak outlook for the rest of the year. In its earnings release, Chipotle Mexican Grill, Inc. (NYSE:CMG) said net income for the second quarter of the year dropped by 4.3 percent to $436 million from $455.7 million in the same period last year. Total revenues, on the other hand, grew by 3 percent to $3.06 billion from $2.97 billion year-on-year, driven by new restaurant openings. Comparable store sales, however, decreased by 4 percent due to lower transactions. Looking ahead, the company expects same-store sales to remain flat year-on-year, but it is working on initiatives to boost performance, including improving execution, introducing new menu innovations, amplifying the rewards program, and expanding globally.3 Pixabay/Public domain Additionally, Chipotle Mexican Grill, Inc. (NYSE:CMG) also expects between 25 and 27 percent of tax rate before discrete items for the full year. While we acknowledge the potential of CMG as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an extremely cheap AI stock that is also a major beneficiary of Trump tariffs and onshoring, see our free report on the . Sign in to access your portfolio