Ousting of Fed Chair Jerome Powell could raise U.S. borrowing costs by nearly $60 billion a year

U.S. President Donald Trump might face an increase of nearly $60 billion (around £44 billion) in interest costs if he opts to oust Federal Reserve chair Jerome Powell, analysts caution.

Ousting Powell would cause an uptick in US Treasury yields, driving up the government’s interest spending amid concerns over surging inflation and growing political uncertainty. According to Telegraph, investors watch Treasury yields closely because they reflect the government’s cost of borrowing and the economy’s health.

Gennadiy Goldberg of TD Securities said firing the Fed chair could add about $58 billion to the yearly interest cost.

This week, the president hinted he could dismiss the Fed chair because renovating the central bank’s headquarters went $2.5 billion over budget.

Following Wednesday’s reports that he was ready to move at once, Trump told reporters, “I don’t rule out anything but I think it’s highly unlikely unless he has to leave for fraud.”

Trump has frequently taken aim at Powell, labeling him a “numbskull” over what he perceives as unnecessarily slow rate reductions.

As chair of the Federal Reserve, Powell serves a four-year term and plays a central role in shaping U.S. monetary policy, including setting interest rates.

Experts warn that removing him, or even signaling political pressure, could make investors demand much higher interest rates, since they’d fear the Fed might be swayed by politics and lose its power to keep inflation in check.

$58 billion estimate covers only part of the picture

Goldberg added that long-term Treasury yields might climb by 20–50 basis points (with each basis point equal to 0.01%), edging 20‑ and 30‑year rates toward approximately 5.5%.

He calculated this uptick would amount to an additional $58 billion in annual interest on the roughly $276 billion of 30‑year and $168 billion of 20‑year securities the Treasury rolls out each year.

The estimate covers only 20 and 30 year bonds and does not include other maturities like 10 year notes, which could also see rates climb.

This projection assumes yield levels remain stable and that the government’s debt issuance strategy stays the same. “If interest rates jump, the debt burden could very quickly become unsustainable,” Goldberg warned.

Alex Everett, a fund manager at Aberdeen, suggested that in a span of two to three months, this shock could push 30‑year yields up by an entire percentage point, approaching 6%.

That scenario would represent the sharpest upswing in US bond yields since the early‑1980s Volcker period, when then‑Fed chair Paul Volcker aggressively raised rates to tame inflation. Everett pointed out that today’s rise would reflect market concerns over the Fed’s ability to curb inflation, rather than its success in doing so.

“[Markets will think] inflation will not be kept under control by an institution that exists to moderate the economy,” he said.

Firing Fed chair could trigger political and fiscal volatility

Removing a Fed chair could also spark wagers on heightened political instability and looser fiscal spending.

“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.

He added that elevated Treasury yields would probably weigh on the dollar, inflicting losses on investors.

This increase would coincide with interest outlays, now about 3.2% of federal expenditures, expected to rise to roughly 6.1% by 2054, if Mr Trump’s budget proposals are adopted, according to the Committee for a Responsible Federal Budget.

At the same time, higher Treasury yields would push mortgage rates, already around 7%, even higher. This will slow down the housing market to its weakest in 30 years.

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