Guotai Haitong: Dismissal of Bao from Jiangxi Welgao Electronics due to difficulty, low profitability, high risk, and low probability.

Guotai Haitong published a research report stating that firing Powell is a high difficulty, low return, and high-risk behavior with a low likelihood of occurring. Trump is more likely to exert influence by announcing a successor in advance. Considering the significant internal monetary policy differences within the Federal Reserve, the impact of Trump reshaping the Fed may be relatively limited. Trump's attacks on Powell stem from "financial anxiety." The passing of the "big beautiful bill" confirms that the U.S. is deepening its path dependence on pro-cyclical deficits, at the cost of facing high debt issuance costs and decreasing long-term debt acceptance. Pressuring the Federal Reserve is a "bad move" to address financial anxiety, as it may be effective in the short term but with significant side effects. Once investors perceive the independence and transparency of monetary policy to be threatened, the probability of a "stock-bond-forex triple kill" scenario reappearing will significantly increase. Guotai Haitong's specific views are as follows: Since control over interest rates cannot be obtained in the short term, the White House is trying to seize control over the amount of money in circulation from the Federal Reserve. The latest stablecoin bill not only eases the pressure on the Treasury Department for debt issuance but also strips the Fed of the right to issue digital currency, creating a "shadow Federal Reserve" represented by stablecoin issuers, expanding the White House's control and supervision over the money supply. The mechanism design of the Federal Reserve's independence presents three obstacles for Trump in achieving his desired rate cuts: First, the law stipulates that the Fed chair cannot be removed from office without cause. Second, recent judgments by high courts have emphasized the Fed's policy independence. Third, the Federal Open Market Committee, which makes interest rate decisions, operates on a two-thirds majority voting system. Based on recent statements from voting members, although Bowman and Waller support immediate rate cuts, the majority still leans towards maintaining the status quo. Historical experience shows the importance of the Fed's credibility in maintaining price stability. During Burn's tenure as Fed chair, he faced political pressure from President Nixon and implemented excessively loose monetary policy in 1971-1972, which is a classic case of the Fed's independence being compromised in history. Although loose monetary policy boosted the U.S. economy in the short term, it also laid the groundwork for stubborn inflation in the future. The Fed's credibility in maintaining its inflation target is hard-won, and the loss of independence and the hesitation in monetary policy may increase the risk of inflation expectations becoming unanchored. Once credibility is lost, repairing it would come at a high cost. How will the aftermath of the leadership change unfold? Guotai Haitong believes that firing Powell is a high difficulty, low return, and high-risk behavior with a low likelihood of occurring. Trump is more likely to exert influence by announcing a successor in advance to avoid damaging the Fed's independence and credibility. Considering the significant internal monetary policy differences within the Federal Reserve, the effectiveness of Trump reshaping the Fed may be relatively limited. Risks: If Trump's accountability efforts exceed expectations, Powell may be forced to resign.