A three-term Senate Republican is now publicly urging President Donald Trump to leave Federal Reserve Chairman Jerome Powell in his role — and warned that his firing could trigger a global economic meltdown.
The New York Times reported Wednesday that Trump has already written a termination letter to Powell and asked several House Republicans in an Oval Office meeting if he should send it. Trump has been frustrated with Powell's refusal to lower interest rates since his second term began in January, and has attacked the Fed chair multiple times on social media over the issue. Powell countered that prematurely lowering interest rates could end up harming the economy in the long run.
On Wednesday, Sen. John Neely Kennedy (R-La.) weighed in on rumors that Trump may consider illegally firing Powell before his term as the chair of the nation's central bank ends in May of 2026. The Louisiana Republican said there would likely be grave economic consequences if the United States' central bank experienced a significant leadership shakeup and/or his would-be replacement cut interest rates too soon.
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"If you fire the chairman of the Federal Reserve, you will see the stock market crash, and you will see the bond market crash," Kennedy said. "If Powell unilaterally cut interest rates three points, 300 basis points, 30 percent right now, you would see the bond market go into a fit. You would see interest rates rise dramatically and it would have a huge impact on us borrowing money to fund the government."
As Kennedy mentioned, the U.S. bond market is very sensitive to sudden changes in interest rates. And should bond investors grow wary of their U.S. Treasury securities and sell them, Kennedy's prediction that the cost of borrowing money could significantly increase may come true.
Trump is also likely aware of how the bond markets would react to a sudden shakeup atop the Fed. Earlier this year, Fox Business correspondent Charles Gasparino reported that Trump pulled back on many of his "Liberation Day" tariffs after Japan contemplated offloading its approximately $30 billion U.S. Treasury securities in response to the new import duties.
According to a January paper from the Congressional Research Service (CRS), the vast majority of the United States' $28.8 trillion in debt is "held by the public," which the CRS clarified was "mostly Treasury securities sold via auctions." Should bond investors offload those Treasury securities en masse, it could simultaneously bankrupt the U.S. government along with significantly lowering the value of the U.S. dollar.
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Watch the video of Kennedy's remarks below, or by clicking this link.