(Dec 10): White House National Economic Council Director Kevin Hassett said he sees plenty of room to substantially lower the Federal Reserve’s benchmark interest rate.
Hassett, the frontrunner in Donald Trump’s search for the next Fed chair according to a Bloomberg report, was asked at the Wall Street Journal CEO Council Summit Tuesday if he would push for the substantially lower rates the president wants if he gets the job.
“If the data suggests that we could do it, then — like right now — I think there’s plenty of room to do it,” he said. Asked whether that meant more than 25 basis points, he said, “correct.”
Hassett’s close alignment with Trump has stirred debate over whether he would maintain the Fed’s decades-long tradition of political independence on interest-rate decisions should he be selected as chair.
Trump himself said in an interview with Politico published Tuesday that a quick reduction of borrowing costs would be a litmus test for his choice to head the Fed.
Political charge
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Asked whether his loyalty, if he takes the Fed’s helm, would be to Trump or to his independent economic judgment, Hassett said he would adhere “to my judgement, which I think the president trusts.”
The comments followed Hasset’s comments Monday, when he said it would be “irresponsible” to lay out a plan for interest-rates over the next six months.
“The Fed chair’s job is to watch the data and to adjust and to explain why they’re doing what they’re doing,” Hassett said during his Monday appearance on CNBC. “And so to say, ‘I’m going to do this over the next six months’ would be irresponsible, really.”
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Hassett on Tuesday again directed criticism at the Fed for some of its policy choices in recent years, accusing the central bank of acting politically.
Powell ties
“I think the most important job that the Fed chair has is to be looking at the economic data and to avoid being part of politics,” he said.
At the same time, he said he had a “very strong” relationship with Fed chair Jerome Powell, whose term at the helm of the US central bank ends in May. Hassett said he’s “almost regularly” met with Powell in his current role, after having had monthly sitdowns when he was chair of the Council of Economic Advisers in Trump’s first term.
Trump’s selected Fed chief is expected to take the slot on the Fed board currently held by Stephen Miran, who’s taken a leave of absence as CEA chair. If the nominee took that governor post when it opens in January, there would be several months when that person would serve under Powell as the outgoing chair.
Hassett on Tuesday again made his case for the rise of artificial intelligence presenting the Fed with an opportunity to set policy as former Fed chair Alan Greenspan did during the technological advancements of the 1990s. Because of expected productivity gains that would counter inflation, Greenspan didn’t push for interest-rate hikes at the time despite low unemployment, Hassett said.
“Right now, AI is a bigger story, productivity wise, than the computer, and so that it’s a time when the Fed has a chance to do what Greenspan did,” he said.
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He added that, with anticipated growth in productivity and capital investments, the underlying potential gross-domestic product growth rate could reach “way north” of 3% and maybe even above 4%.
“There’s a lot of room for doing something like making the interest rate lower, which would increase aggregate supply and aggregate demand,” he said.
Uploaded by Isabelle Francis
