Mounting pressure from President Trump for Federal Reserve Chair Jerome Powell's resignation is driving investors toward inflation-hedging strategies. Market participants anticipate that a more dovish Fed leadership could accelerate price growth, compelling creditors to demand higher yields on bonds. Fixed-income traders now price in elevated inflation expectations, with the five-year TIPS breakeven rate surging to 2.476% – a three-month peak – during Monday's session.

The White House's recent scrutiny of the Federal Reserve headquarters renovation costs coincides with escalated criticism against Powell, fueling speculation about a potential "for-cause" dismissal. This legal pathway represents the administration's sole plausible method to remove the Fed chair. Concurrently, the 30-year Treasury yield breached 5% on Tuesday for the first time since late May, reflecting dual anxieties over America's swelling fiscal deficits and Powell's precarious position.

While a policy-easing Fed might deliver mixed short-term equity effects, consequences would likely include dollar depreciation, intensified Treasury volatility, and rising long-term rates. Such dynamics would elevate borrowing costs for mortgages and corporate debt. Trump's persistent attacks on Powell's interest rate decisions since January have ignited concerns about presidential overreach into central bank autonomy. JPMorgan Chase CEO Jamie Dimon reinforced these worries on Tuesday, cautioning against unforeseen repercussions and declaring Fed independence "sacrosanct."

Analysts warn that perceived erosion of Fed independence could trigger violent asset price swings. A primary risk involves Treasury selloffs driving long-term yields substantially higher relative to short-term rates. Guy LeBas, Janney Capital Management's chief fixed income strategist, noted: "Should markets perceive a politically manipulated Fed cutting rates recklessly, long-term inflation expectations would surge, steepening the yield curve. The reaction could be dramatic – 30-year yields might spike by percentage points, not basis points."

Despite June FOMC minutes showing most policymakers concerned about tariff-induced inflation risks – with scant support for July rate cuts – Trump reiterated that Powell's departure "would be a good thing." Though presidents cannot dismiss Fed chairs over policy disputes, the administration has repeatedly publicly demanded Powell's resignation or rate reductions.

Chip Hughey of Truist Advisory Services observed: "Under this scenario, short-term yields could fall from accelerated Fed easing, while long-term yields would likely reprice higher due to entrenched inflation expectations and expanding term premiums amid declining institutional trust."