Focus on the BIG picture.
Wednesday, Dec 10, 2025
Outside the box.
White House Adviser Hassett Says There Is “Plenty of Room” for Further Fed Rate Cuts
Kevin Hassett, front-runner for the next Fed chair, signals willingness to lower interest rates — sparking market and political debate
At the WSJ CEO Council gathering on Tuesday, White House economic adviser Kevin Hassett asserted there remains “plenty of room” for the Federal Reserve to cut interest rates further, even as the central bank prepares for what may be its final policy meeting of 2025. He maintained that any decision would rest on economic data — and declined to bow to political pressure, underscoring his independence even as he stands as a leading candidate to replace Jerome Powell in May.
Hassett pointed to the transformative potential of advances in artificial intelligence, drawing a parallel to the technology-driven boom of the 1990s, and suggested that such productivity gains could support growth without reigniting inflation.
Asked whether he would push for rate reductions if confirmed as Fed chair, he said: “If the data suggests that we could do it — then, like right now — I think there’s plenty of room to do it.” He added that while the December meeting might deliver a 25-basis-point cut, even larger reductions could be justified if economic conditions warrant.
Officials in the White House, including President Donald J. Trump, have repeatedly alleged the current Fed has delayed rate cuts for political reasons.
Hassett echoed those criticisms, stating that the central bank must remain focused purely on economic indicators.
Still, he emphasised that he would not pursue aggressive rate cuts if inflation shows signs of rising — signalling a balancing act between supporting growth and preserving price stability.
Financial markets reacted sharply: yields on long-term U.S. Treasury bonds rose, reflecting investor concern that steep rate cuts could revive long-term inflation risks.
Some analysts warned that an abrupt shift in policy — especially under a chair closely tied to the administration — could undermine confidence in the Fed’s independence, long upheld as a pillar of stable U.S. monetary policy.
With Powell’s term ending in May and the administration expected to announce its choice in early 2026, Hassett’s comments offer a clear preview of a potentially more aggressive path of monetary easing.
For markets, households and businesses, the implications of a deeply data-driven but politically attuned new Fed leadership could be profound.
Hassett pointed to the transformative potential of advances in artificial intelligence, drawing a parallel to the technology-driven boom of the 1990s, and suggested that such productivity gains could support growth without reigniting inflation.
Asked whether he would push for rate reductions if confirmed as Fed chair, he said: “If the data suggests that we could do it — then, like right now — I think there’s plenty of room to do it.” He added that while the December meeting might deliver a 25-basis-point cut, even larger reductions could be justified if economic conditions warrant.
Officials in the White House, including President Donald J. Trump, have repeatedly alleged the current Fed has delayed rate cuts for political reasons.
Hassett echoed those criticisms, stating that the central bank must remain focused purely on economic indicators.
Still, he emphasised that he would not pursue aggressive rate cuts if inflation shows signs of rising — signalling a balancing act between supporting growth and preserving price stability.
Financial markets reacted sharply: yields on long-term U.S. Treasury bonds rose, reflecting investor concern that steep rate cuts could revive long-term inflation risks.
Some analysts warned that an abrupt shift in policy — especially under a chair closely tied to the administration — could undermine confidence in the Fed’s independence, long upheld as a pillar of stable U.S. monetary policy.
With Powell’s term ending in May and the administration expected to announce its choice in early 2026, Hassett’s comments offer a clear preview of a potentially more aggressive path of monetary easing.
For markets, households and businesses, the implications of a deeply data-driven but politically attuned new Fed leadership could be profound.
