Kevin Hassett, former National Economic Council director under President Donald Trump, stated on Monday that the Federal Reserve should consider cutting interest rates instead of raising them. During a CNBC interview, Hassett argued that the current inflation is primarily driven by supply-side factors rather than government policies, which he believes would not be alleviated by increasing rates.
Hassett's comments come as Fed Chairman Kevin Warsh faces pressure regarding market expectations for rate hikes. Investors currently perceive a 50% chance of a rate increase at the Fed's upcoming meeting in September, despite inflation remaining above the Fed's 2% target.
Hassett noted that Trump has historically favored lower rates and has criticized Warsh’s predecessor, Jerome Powell, for not adopting a more lenient monetary policy. Recently, Trump has indicated he may allow Warsh some flexibility, attributing the resistance to lower rates to other members of the monetary policy committee.
In addition to discussing interest rates, Hassett addressed the disappointing jobs report released by the Bureau of Labor Statistics, which showed a loss of 23,000 payroll jobs in July, contradicting expectations for growth. He also mentioned the slight decline in the unemployment rate to 4.1%, which he attributed to a decrease in labor force participation.
Hassett also commented on the ongoing legal issues surrounding Fed governor Lisa Cook, whom Trump attempted to remove from her position. The White House recently sent Cook a letter requesting an explanation regarding allegations of misconduct related to mortgage applications, emphasizing the seriousness of the matter.