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The U.S. Department of Justice under President Trump transferred an investigation into Federal Reserve Chair Jerome Powell to the Fed's internal inspector, potentially clearing the way for Kevin Warsh's confirmation to the Federal Reserve Board. This move removes a regulatory hurdle for Warsh, a former Fed official and Trump ally, who has been nominated to a key position overseeing monetary policy. The DOJ's decision to hand over the probe to the Fed's own oversight body suggests reduced political pressure on the central bank, which could stabilize market expectations around future interest rate decisions.
For global markets, this development signals a potential shift in Fed governance dynamics. A confirmed Warsh, known for his hawkish stance on inflation, might influence the central bank's approach to monetary policy, particularly in relation to the U.S. dollar and global capital flows. Traders should monitor how this affects Fed communication and policy alignment with Trump's economic agenda, which could indirectly impact commodities, equities, and emerging markets.
For MENA investors, the Fed's policy direction is critical due to its influence on oil prices and global liquidity. A more predictable Fed could reduce volatility in Gulf markets linked to dollar-denominated assets. Key watchpoints include Warsh's confirmation timeline, Fed meeting minutes, and any statements on inflation targeting or quantitative tightening.
