Written by: Zhao Ying
Source: Wall Street News
Hassett stated that the Federal Reserve should cut interest rates at its meeting next week, and he expects the cut to be 25 basis points. This comes as Trump prepares to nominate a new Fed chair, leading to a surge in market attention regarding the direction of monetary policy.
On Thursday, Kevin Hassett, the "shadow Fed president" and director of the White House National Economic Council, told Fox News that based on recent statements from Fed governors and regional Fed presidents, "they now seem more inclined to cut interest rates." He emphasized his desire to "achieve lower interest rates" in the long term and said that if the market reaches a consensus on 25 basis points, "I would accept it."
Earlier this week, Trump stated that he plans to announce his nominee for Federal Reserve Chair in early 2026 and has already identified a final candidate. He has recently praised Hassett publicly on multiple occasions and hinted at her potential nomination at White House events. If the nomination proceeds, Trump's allies are discussing having Treasury Secretary Bessett concurrently hold Hassett's current position.
However, Deutsche Bank believes that even if Hassett takes office, implementing interest rate cuts will still face numerous obstacles. By mid-2026, the fundamentals of the US economy may not support significant interest rate cuts, and coupled with hawkish resistance within the Federal Reserve, aggressive easing policies will be difficult to achieve.
Compromise between long-term easing goals and short-term realities
In the interview, Hassett clearly expressed his long-term pursuit of lower interest rates, but also demonstrated a pragmatic attitude. He stated that he would be willing to accept a rate of 25 basis points if the Federal Open Market Committee reached a consensus.
When asked how many additional rate cuts he would pursue if nominated, Hassett avoided giving a specific number, emphasizing that the Fed chair's responsibility is to be "highly sensitive to data" and to consider the impact of interest rate adjustments on inflation and employment. This statement shows that he is trying to strike a balance between policy inclination and central bank independence.
The nomination process is being accelerated.
Trump has recently been frequently signaling that Hassett might be nominated. At a White House event on Tuesday, Trump publicly stated, "I think there's another potential Fed chair here, I don't know who can say that—potential. He's a respected man, I can tell you that. Thank you, Kevin."
Hassett himself remained cautious about the nomination, saying, "The president is considering several candidates, and it's an honor to be on the same list as some excellent people. We'll see how it goes." Trump has indicated he will announce the final choice in early 2026.
Market expectations face a real test
Deutsche Bank has cautioned against market optimism regarding a "dovish shift." The bank points out that by mid-2026, the fundamentals of the US economy may not support significant interest rate cuts, and hawkish members within the Federal Reserve Board will also pose a resistance factor.
Investors should be wary of overpricing aggressive monetary easing. Deutsche Bank believes the final policy path is likely to be far more moderate and neutral than the market expects, and even if Hassett succeeds in taking office, his policy implementation will be subject to multiple practical constraints.
