Director of the U.S. National Economic Council Hassett: The Federal Reserve's possible interest rate hike decision this week will be "understood and respected" by the government
Kevin Hassett, Director of the National Economic Council, commented on the Federal Reserve's possible interest rate hike decision this week (September 16), stating that if he were a member of the Federal Open Market Committee (FOMC), he would vote against the hike.
Hassett also indicated that if the Federal Reserve ultimately decides to raise rates, the government will "understand and respect" that decision.
He cited data on core CPI (Consumer Price Index) trends over the past three months, noting that the annualized core inflation rate averaged about 0.2%, significantly lower than the previous three months' readings. He believes that data from the last three to four months should be given more weight, as it better reflects the true direction of price pressure changes. He stated: "If you observe recent trends and the random processes driving inflation, you can see that the situation is slowing down."
Reports indicate that the FOMC is currently holding a two-day meeting, with the market pricing a 92.7% probability of a 25 basis point rate hike. In the background, the yield on the 10-year U.S. Treasury has risen to 5.041%, the highest level since 2007.
Contrasting Hassett's views is former Cleveland Fed President Loretta Mester, who advocates for continued tightening of policy, arguing that current demand is strong, consumer spending remains resilient, and there is no convincing evidence that inflation is returning to the 2% target.
From a market mechanism perspective, Hassett's public opposition to a rate hike, in a situation where a hike seems almost certain (with a 92.7% market pricing probability), essentially serves as a preemptive communication for the government within the framework of monetary policy independence. Since the President cannot directly intervene in the Fed's interest rate decisions, public statements from administration officials serve to convey policy positions to the market and the public while retaining accountability space. Meanwhile, the rise in the 10-year Treasury yield to its highest level since 2007 reflects that the market is already pricing in a tighter monetary policy path and the financing pressures of high fiscal deficits. This aligns with Chevron CEO Wirth's warnings about a fuel crisis and energy prices driving inflation, indicating that current inflation is more supply-shock driven rather than due to overheating demand, which is consistent with Moody's Chief Economist Mark Zandi's previous assessments. Who benefits: If the Federal Reserve ultimately adopts a dovish stance and keeps rates unchanged, interest-sensitive growth assets and the credit market may gain breathing space; who is under pressure: If a rate hike occurs as currently priced in by the market at 92.7%, combined with the high yield on the 10-year Treasury, high-leverage companies, real estate, and consumer credit-related sectors will face more direct financing cost pressures.
Source: Public information
ABAB AI Insight
Kevin Hassett has long served as an economic advisor in various Republican administrations, previously holding the position of Chairman of the White House Council of Economic Advisers (CEA) during Trump's first term, and now serving as Director of the National Economic Council (NEC) in Trump's second term. In April of this year, during a previous surge in oil prices due to Middle Eastern tensions that sparked market speculation about rate hikes, he publicly stated that "raising rates now would be a mistake," continuing his consistent opposition to tightening monetary policy due to supply-side shocks.
From the perspective of policy communication resources, Hassett's choice to cite the recent three-month core CPI annualized growth rate (approximately 0.2%), rather than making vague political statements, essentially attempts to engage in a direct confrontation with the Fed's hawkish stance on a professional economic discourse level, vying for interpretative authority on the critical judgment of "whether inflation has truly cooled down." This aligns closely with Zandi's earlier argument that "current inflation is primarily driven by supply shocks such as energy prices and tariffs, and rate hikes cannot directly address it," forming a resonance between White House economic advisors and some independent economists.
Historical precedents of "White House economic advisors publicly questioning the Fed's tightening stance while simultaneously promising to respect its independent decisions" can be seen during the Reagan administration with Treasury Secretary Regan's public disagreements with then-Fed Chairman Paul Volcker, as well as during Trump's first term with multiple public criticisms of then-Fed Chairman Powell's rate hike decisions. Such disagreements typically reflect the inherent policy goal tension between the executive branch (more focused on short-term economic growth and financial market stability) and the central bank (more focused on long-term price stability). The current disagreement surrounding the September meeting is at a critical juncture, with the Fed's new chairman Warsh shifting to a hawkish stance, while the causes of inflation—whether due to overheating demand or supply shocks—remain contentious.
This essentially represents a typical display of tension between executive power and central bank independence under the backdrop of "regulatory changes": the Fed's statutory independence means the White House cannot directly veto its rate decisions, so executive officials can only attempt to influence the central bank's decision-making by publicly arguing economic data and applying pressure, rather than directly intervening in voting outcomes. Mechanically, Hassett's emphasis on "recent data should be given more weight" is, in fact, challenging the Fed's traditional decision-making framework, which tends to reference longer-term inflation trends and expectations. This dispute over data interpretation essentially reflects a soft power struggle in the monetary policy-making process regarding "whose economic narrative is more persuasive."
ABAB News · Cognitive Laws
- The central bank is independent of the president, but not independent of public opinion.
- Data itself is neither right nor wrong; weight is the battlefield.
- Whether to raise rates or not, it ultimately comes down to whose narrative is louder.