Analyst: If Trump targets Powell, the US economy could enter a recession

Analysts at Evercore ISI said any move by the Trump administration to fire Federal Reserve Chairperson Jerome Powell "would lead to a surge in stagflationary trading", but said it was "unlikely" that such a move would materialise. The movements in the bond and currency markets suggest that the market has lost confidence in Trump's economic policies. However, there is no sign yet that the market has lost confidence in the Fed, as indicators of expected inflation remain low. Any move to undermine the Fed's independence would cause long-term yields to soar on inflation risk, the yield curve to steepen sharply, the dollar to plunge and risk premiums across the board, including equity risk premiums, which could well trigger a recession.