The dispute between Trump and Powell has raised concerns about a resurgence in inflation

Long-term U.S. Treasury yields rose on Monday and the dollar resumed its decline after White House economic adviser Hassett said Trump and his team are continuing to study whether Federal Reserve Chairperson Jerome Powell can be fired. The remarks have raised and raised concerns about the Fed's independence. Markets also believe the issue could lead to higher inflation. "The monetary policy fallout from Trump's tariff plan puts monetary policymakers in a bind as tariffs are expected to change the economic trajectory and divert the Fed from its two long-term goals," said Ian Lingen and Ware Hartman, rates strategists at Bank of Montreal Capital Markets. "There is a sense that the inflation mandate in the Fed's dual mandate is once again a clearer priority. Not only has Mr. Powell gone out of his way to emphasise price stability as a prerequisite for maximum employment, but he has continued to use relatively strong language on the price stability objective rather than maximum employment. "Meanwhile, Will Compenauer, macro strategist at FHN Financial, warned that US Treasury yields could rise sharply if Mr. Trump fired Mr. Powell." The importance of central bank independence in stabilising markets' long-term inflation expectations cannot be overemphasized, "he said." This topic has pushed investors away from US assets on the margins, but if the market believes there is a real risk to the Fed's creditworthiness, long-term yields will soar, not a few basis points higher. "