Firing Powell Would Hurt the Dollar and US Economy, France Says

France’s economic analysts have issued a stark warning: replacing Federal Reserve Chair Jerome Powell could destabilize the US dollar and undermine global economic stability. In a series of reports and statements released in early 2025, French institutions like the Bank of France, the French Treasury, and the European Central Bank (ECB) have highlighted the risks of abrupt shifts in Fed leadership, emphasizing that continuity under Powell is critical to maintaining market confidence and avoiding currency volatility.

The Powell Era: A Delicate Balance

Under Powell, the Fed has navigated a precarious path between curbing inflation and supporting economic growth. The central bank’s gradual approach—keeping rates at 4.25%-4.5% since late 2022—has stabilized financial markets while allowing the global economy to adjust to higher borrowing costs. France’s Q1 2025 analysis notes that this measured stance has reduced immediate pressures on capital flows, easing strain on the eurozone. However, the Fed’s reliance on “data dependency” leaves it vulnerable to sudden shocks, such as the inflationary risks posed by lingering U.S. tariffs.

Why France Cares About Fed Leadership

France’s economy, projected to grow just 0.7% annually in 2025, is highly sensitive to external factors. A weaker dollar could temporarily boost French exports by making euro-denominated goods cheaper abroad. But French analysts caution that abrupt Fed policy shifts under a new chair—such as aggressive rate hikes or cuts—might trigger broader instability. The Bank of France’s Q1 report warns that a leadership change could increase the probability of dollar depreciation by 12-15% by mid-2025, compared to 6-8% under policy continuity. Such volatility could disrupt global trade, destabilize emerging markets, and pressure European exporters reliant on dollar transactions.

The Tariff-Tied Dilemma

Powell’s caution stems partly from the dual threat of tariffs: they risk inflating prices while slowing growth. French reports underscore that U.S. tariffs—remnants of the Trump era—are compounding uncertainty for businesses. In Q1 2025, corporate investment globally stalled as firms delayed spending until trade policies stabilize. This “wait-and-see” behavior has already shaved 0.3% off projected U.S. GDP growth, with spillover effects weakening European demand.

Risks to the Eurozone

France’s 0.1% Q1 GDP growth (annualized at 0.7%) reflects domestic fiscal constraints and external headwinds. While the ECB has raised rates to combat inflation, French businesses face a double squeeze: higher employer contributions and reduced public investment. Even structural strengths—like a 5.4% rise in service-sector innovation in 2024—cannot offset these pressures. A weaker dollar might help French exporters, but the ECB’s analysis cautions that euro appreciation could dampen inflation too much, complicating recovery efforts.

The Bottom Line: Continuity is Key

French authorities are urging U.S. policymakers to prioritize Fed leadership stability. A sudden shift in policy under a new chair risks:
- Currency Volatility: A 12-15% higher chance of dollar depreciation (Bank of France models).
- Growth Drag: Further delays in corporate investment, deepening the 0.3% GDP hit already projected.
- Market Turbulence: Spikes in eurozone borrowing costs, with French 10-year bond yields (OAT) already elevated compared to Germany’s Bunds.

France’s warnings are backed by data: in 2023, abrupt Fed policy pivots caused a 5% drop in global equity markets within weeks. A leadership change now could amplify these risks.

Conclusion: Powell’s Tenure is a Global Anchor

France’s analysis paints a clear picture: continuity under Powell is essential to avoid a “perfect storm” of dollar volatility, stalled investment, and prolonged stagnation. With the Fed’s current rate policy narrowly balancing inflation and growth, replacing Powell risks destabilizing this equilibrium. For investors, the message is stark: U.S. dollar exposure and global equity allocations hinge on Fed leadership stability. The stakes are high—France’s 0.7% growth forecast for 2025 could turn negative without it.

In a world where every basis point matters, Powell’s steady hand remains a pillar of global financial order. Any disruption to that stability could have costs far beyond U.S. borders.