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Hassett Criticizes the Pace of Rate Cuts

Kevin Hassett, director of the National Economic Council and a leading contender to succeed Federal Reserve Chair Jerome Powell, said the Federal Reserve is moving too slowly to lower interest rates despite signs of strong economic momentum.

Speaking in a television interview, Hassett argued that the U.S. is falling behind other major economies when it comes to easing monetary policy, even as growth continues to exceed expectations.

He pointed to the divergence between U.S. policy and global central banks as evidence that the Fed is being overly cautious.

Strong Growth Undermines the Case for High Rates

The U.S. economy expanded at an annualized rate of 4.3 percent in the third quarter, significantly above the 3.2 percent consensus forecast. Hassett emphasized that this level of growth suggests the economy can handle lower borrowing costs without reigniting inflation.

He also credited a portion of that expansion to changes in trade dynamics, saying roughly 1.5 percentage points of growth came from a narrower trade deficit tied to tariff policy.

In Hassett’s view, growth is being powered not just by consumer spending but by structural forces that are reshaping productivity across the economy.

AI Seen as a Deflationary Force

A key pillar of Hassett’s argument is the role of artificial intelligence. He said rapid adoption of AI technologies is boosting output while simultaneously putting downward pressure on prices.

According to Hassett, productivity gains driven by automation, data analytics, and advanced computing allow companies to grow without passing higher costs onto consumers. That dynamic, he argues, weakens the case for keeping interest rates elevated.

Fed Signals Caution Despite Recent Cuts

The Federal Reserve cut interest rates by a quarter point in December, marking its third reduction of the year. However, policymakers signaled that future cuts could come at a slower pace, citing lingering uncertainty around inflation and economic conditions.

The December decision revealed growing divisions within the central bank. Three Fed governors dissented, the highest number of opposing votes since 2019. Chair Powell later described the decision as a close call, reinforcing the message that the Fed remains cautious about easing too quickly.

Political Pressure and Fed Independence

President Donald Trump has repeatedly criticized the Fed for not cutting rates faster, arguing that lower borrowing costs are needed to improve affordability for households and businesses.

Hassett’s proximity to the White House has raised concerns among some observers about whether he would maintain the Fed’s independence if nominated. He has pushed back on those concerns, stating publicly that central bank independence is essential for long-term economic stability.

Trump has said he plans to announce his nominee for Fed chair soon and has made clear he wants someone who strongly supports lower interest rates.

Public Sentiment Lags the Data

While economic indicators remain strong, public confidence has not kept pace. Trump’s approval rating on the economy stands at 37 percent, reflecting continued frustration over affordability and cost-of-living pressures.

Hassett suggested that public perception often diverges from economic reality, arguing that sentiment is shaped heavily by media coverage and how individuals interpret broader economic signals rather than by headline growth figures alone.

What Comes Next

With Powell’s term ending in May, the debate over the future direction of U.S. monetary policy is intensifying. Hassett’s comments place him firmly in the camp favoring faster rate cuts, setting up a clear contrast with the Fed’s current, more cautious approach.

As markets, policymakers, and voters focus on inflation, growth, and affordability, the pace of rate cuts and the identity of the next Fed chair are likely to remain central themes in the months ahead.