Hassett Defends the Fed's Independence and Reassures on Rates: Trump Will Not Have Direct Influence

The future President of the Federal Reserve, Kevin Hassett, provided significant clarifications on the role of the central bank and its decision-making autonomy regarding monetary policy. During an in-depth interview, Hassett reiterated that the setting of rates will remain solely in the hands of the Federal Open Market Committee, regardless of external pressures.

The Fed’s Autonomy Remains a Priority

Hassett emphasized firmly that the independence of the central bank will be preserved even if he assumes the role of president. While acknowledging that he would listen to suggestions from the Trump administration, he clarified that such opinions could not influence the votes of policymakers on federal fund rates. The economist specified that the presidential viewpoint could only be presented within the committee if supported by concrete evidence and reliable data.

Hassett also confirmed that he maintains daily conversations with President Trump in his current role at the National Economic Council; however, he reiterated that these discussions would have no formal weight on rate policies.

Inflation: A Blurred Vision of Data

On the inflation front, Hassett presented a detailed analysis of consumer prices. Although the Consumer Price Index remains at 3% annually and the Personal Consumption Expenditures index at 2.8%, he highlighted significant variations at the level of specific products.

He cited the case of prescription drugs, which decreased by six-tenths of a percentage point this year after a 9% increase during the previous administration. Similarly, gasoline prices have fallen from historic highs. Hassett attributed inflationary pressures to microeconomic factors such as avian influenza and macroeconomic dynamics related to budget deficits and past accommodative monetary policies.

According to the economist, the deficit should be $600 billion lower than the previous year, while the trade deficit has halved. These developments would support the gradual approach toward the Fed’s 2% inflation target.

The Labor Market and Employment Outlook

Regarding employment data, Hassett acknowledged the slowdown in job gains but expressed confidence in future prospects. He highlighted that upcoming employment data, particularly the November household survey, will provide a more accurate assessment of the labor market’s state.

The economist also noted that consumers’ real purchasing power has increased by about $1,200 this year after decreasing by $3,000 in the previous period. He further pointed out that monthly food spending, while still above previous levels, has begun to decline with room for further reduction.

The Nomination Issue and Functional Independence

Hassett clarified that his nomination as a candidate for Fed chair, along with Kevin Warsh’s, does not interfere with rate policy. He reiterated that the president’s opinion would carry no more weight than that of a voting committee member. The only prerogative is to present valid arguments to the committee and allow the panel to decide independently.

He also stated that communication with Trump would continue regardless of his future role, following the standard practice of every Fed chair to consult with market experts. However, he again emphasized that such consultations would not influence the determination of interest rates.