The simmering war between the White House and the Federal Reserve has exploded into a full-blown constitutional crisis. The US Department of Justice has launched a criminal investigation into Fed Chair Jerome Powell, accusing him of misleading Congress regarding a $2.5 billion renovation of the bank’s headquarters.

President Donald Trump, who has long lambasted Powell for refusing to slash interest rates, denied involvement but termed the probe "interesting." However, White House Economic Adviser Kevin Hassett signaled the administration’s stance, stating he expects "nothing to see" but pointedly noting that Powell should have been "more transparent."

Independence Under Fire

The investigation centers on cost overruns and the discovery of asbestos in the Fed’s Constitution Avenue building. But Wall Street sees a different motive: a pretext to oust Powell before his term expires in May 2026.

• The Allegation: Prosecutors claim Powell lied about the scope of the renovations during testimony last June.
• The Defense: Powell remains defiant, stating the investigation is a "pressure tactic" to force monetary policy changes favorable to the administration. "I will not resign," he affirmed in a video statement.

Global Economic Tremors

For emerging markets like Kenya, a compromised US Fed is a nightmare scenario. If the Fed loses its independence and cuts rates prematurely to suit political whims, it could trigger inflation in the US, weakening the dollar temporarily but creating long-term volatility. The Central Bank of Kenya (CBK) will be monitoring this closely, as any erratic moves in the US dollar directly impact Kenya’s import bill and debt servicing costs.