WASHINGTON: White House economic adviser Kevin Hassett, the front-runner to be the Federal Reserve's next chair, told the WSJ CEO Council on Tuesday there is "plenty of room" to cut interest rates further, though he added that if inflation rises the calculation may change.
Meanwhile, President Donald Trump said he continues to search for a successor to Fed Chair Jerome Powell, whose term ends in mid-May and whom Trump has repeatedly called incompetent or worse for not cutting interest rates sharply.
"We're going to be looking at a couple of different people, but I have a pretty good idea who I want," Trump told reporters aboard Air Force One. Trump on Wednesday will kick off a final round of interviews for the Fed chair job with a meeting with former Fed Governor Kevin Warsh, the Financial Times reported Tuesday. Trump on Tuesday told Politico he would make support for immediately slashing interest rates a litmus test in his choice of a new Fed chair, and all candidates for the job had made it clear they supported further easing.
Besides Warsh and Hassett there are two other finalists, the FT reported. Trump is expected to announce his decision in January.
OTHER CONTENDERS FOR FED ROLE
Previously, Treasury Secretary Scott Bessent said the short list includes Fed Governor Christopher Waller and Fed Vice Chair of Supervision Michelle Bowman - both Trump appointees from the president's first term - as well as BlackRock's Rick Rieder. Trump has also repeatedly said he wants Bessent to take the top Fed job, though Bessent says he would like to keep his current position.
Hassett has proposed that he be appointed to fill out the remainder of Fed Chair Powell's term as governor, which runs until January 2028, the FT reported.
That approach would allow Trump to appoint Bessent to be the next Fed chair, the FT said, though that gambit could only work if Powell resigns as governor when his term as chair expires in mid-May. He has not said whether he will do so. The Fed on Tuesday began its last policy-setting meeting of the year, and on Wednesday at the meeting's close is expected to lower rates by a quarter of a percentage point for a third time this year, but to signal little further easing next year.
Analysts have raised questions over whether Hassett's appointment to the Fed could undercut what is widely seen as the Fed's longstanding independence from short-term political pressures under Fed chairs since Paul Volcker, who led the central bank in its deeply unpopular but ultimately successful campaign of interest-rate hikes to fight the entrenched inflation of the 1970s.
"What we have to do is recognize that like in the '90s, we're in a potentially extremely transformative time," Hassett said at the WSJ CEO Council, referring to the possibility that artificial intelligence could supercharge economic growth and allow rate cuts without overheating the economy. "If the data suggests that we could do it then - like right now, I think there's plenty of room to do it."
INFLATION STILL ABOVE FED'S TARGET
A number of Fed presidents have expressed concern about cutting rates while inflation is still above the Fed's 2% target and headed up. Wednesday's rate decision is expected to draw some dissents that would underscore that division. Hassett said he would aim to be non-political and expressed confidence that he could win backing for his rate-cutting view because he was "fact-based."
"I've got lots of friends at the Fed that are on both sides," said Hassett, who worked as an economist at the Fed for about five years in the 1990s before becoming a long-time adviser to Republican officials and conservative think tanks.
More recently he has aligned his views closely with Trump's economic vision.
Asked on Tuesday about whether Trump's plan to send $2,000 checks to Americans could reignite inflation, he said that Trump's tariffs and tax cuts had helped reduce the U.S. deficit, creating "more room to do things that are stimulative." - Reuters
