Kevin Hassett, Rumored Fed Pick, Criticizes Inflation Data as Politically Biased

Kevin Hassett is gaining attention as a potential successor to Jerome Powell at the Federal Reserve. His name emerged prominently in market predictions, and there are hints from President Trump about his selection. The White House aims for an announcement by Christmas. However, reactions to Hassett’s possible nomination vary among economists.

Hassett’s Supporters and Critics

Hassett’s supporters view him as a skilled policy strategist. Stephen Moore, a former Trump advisor, describes him as a “hard money guy” committed to defending the dollar. Conversely, critics express concern over his evolution into a political loyalist. Some fear that he prioritizes loyalty over institutional independence and factual accuracy.

Contradicting Economic Data

Recent statements by Hassett have raised eyebrows. In early November, he claimed inflation had significantly decreased, contrary to reports indicating a consistent rise in consumer prices for several months. This discrepancy highlights the tension between Hassett’s perceptions and the official economic data.

• Hassett’s past includes roles at the Federal Reserve and advising presidential candidates.
• He previously received bipartisan support, including endorsements from former Fed chairs like Alan Greenspan and Ben Bernanke.
• Hassett was instrumental in formulating the 2017 corporate tax cuts, emphasizing their positive impact on investment.

Controversial Statements and Proposals

As a key Trump economic advisor, Hassett has defended the administration’s policies while frequently appearing on media platforms. He has suggested that the Federal Reserve should reduce interest rates promptly, believing current economic indicators merit such action.

Hassett has also insinuated political bias within the Bureau of Labor Statistics, raising concerns among his colleagues regarding the integrity of official data. Dean Baker, a progressive economist, criticized Hassett’s claims as unfounded, emphasizing the importance of confidence in statistical methodologies.

The Debate Over His Nomination

Hassett’s potential role as Fed chair has ignited debate among economists about the necessity of political independence in such a position. While some view him as an ideal candidate for the role, others question whether he can uphold the Fed’s mandate amidst political pressures.

• Gregory Mankiw, former CEA chair, expressed concern about Hassett’s defense of Trump’s economic policies.
• William Beach, another supporter, praised Hassett’s economic expertise and communication skills.

Risks in the Current Economic Climate

The reaction from bond markets over Hassett’s rising profile suggests apprehension. Jon Hilsenrath, a financial analyst, noted an increase in the 10-year Treasury yield, indicating traders may expect a more lenient approach to inflation under Hassett’s guidance.

If confidence in the Fed’s independence wanes, it could lead to significant repercussions in bond markets. Economists warn that such perceptions could risk destabilizing economic trust and market dynamics.

The ongoing discussions around Hassett’s nomination and its implications for economic policy reflect a broader concern among economists. The balance between political loyalty and the integrity of economic governance remains a crucial narrative as the nomination process unfolds.