Core Viewpoint - The rumor of Trump firing Powell caused significant market volatility within an hour, highlighting the potential financial impact of political interference on the Federal Reserve's independence [1][2]. Group 1: Market Reaction - Following the rumor, market risk aversion surged, leading to declines in U.S. stocks and the dollar, while assets like gold and Bitcoin rose [1]. - During the hour of speculation, the probability of Powell being dismissed increased by approximately 15 percentage points, nearing a peak of 40% [2]. - Deutsche Bank's analysis suggested that if the probability of dismissal reached near 100%, the market impact could be four times greater than the initial reaction [2]. Group 2: Legal and Structural Vulnerabilities - The market's reaction was partly due to investors recognizing the legal pathways for political intervention, as the President can fill vacancies on the Federal Reserve Board without Senate approval during recess [3]. - The U.S. economy's structural weaknesses, including significant twin deficits and negative international investment positions, amplify the risks of capital outflows and dollar depreciation if investor confidence is shaken [3]. Group 3: Future Implications - The ultimate impact of such political events will depend on the Federal Reserve's internal unity and the broader macroeconomic context [4]. - If inflation remains moderate and close to the Fed's 2% target, conflicts between the White House's push for rate cuts and the Fed's policy objectives may lessen, potentially stabilizing market reactions [4]. - Conversely, if high inflation persists while political pressure mounts for monetary policy changes, it could lead to severe financial turmoil [4].