Trump Declares: Disagree with My Interest Rate Views? You Won’t Be Fed Chair
Political loyalty tests hit the Federal Reserve—hard.
The New Litmus Test
The traditional independence of the world's most powerful central bank faces a direct challenge. The message is unambiguous: alignment on monetary policy is now a non-negotiable prerequisite for leadership. This reshuffles the deck for future appointments, placing doctrinal purity above conventional economic credentials.
Markets on Notice
For traders, this signals potential volatility ahead. The prospect of a Fed steering explicitly toward political, rather than purely economic, winds could rewrite the playbook for interest rate sensitivity across asset classes. It's a stark reminder that the levers of traditional finance are still pulled by people—and people have agendas.
The Cynical Take
Because nothing says 'stable monetary policy' like requiring a loyalty oath first—just what the $25 trillion U.S. Treasury market needs, another layer of uncertainty to keep things spicy.
The era of central bank autonomy isn't just fading; it's being shown the door by the very process meant to protect it.
Kevin Hassett backs faster cuts as Fed signals caution
Kevin Hassett, the National Economic Council director, echoed parts of Trump’s stance in a CNBC interview on Tuesday. Kevin said the Federal Reserve is moving too slowly on rate reductions, even though economic growth has accelerated. He said the United States is lagging other central banks globally when it comes to easing policy.
Kevin said advances in artificial intelligence are pushing productivity higher while also keeping inflation pressure lower. He also linked recent growth to trade policy, saying tariffs implemented under Trump reduced the U.S. trade deficit and accounted for about 1.5% of third-quarter growth.
Official figures showed the economy expanded at an annual rate of 4.3%, exceeding the Dow Jones consensus estimate of 3.2%.
The Federal Reserve cut rates by a quarter point on Dec. 10, marking its third reduction of the year. The central bank also indicated future cuts could slow.
Three Fed governors voted against the move, the highest number of dissents since 2019. After the meeting, Jerome Powell, the current Fed chair, said the decision was “a close call.”
Trump has repeatedly criticized the Fed for not cutting rates faster. Kevin’s potential candidacy to replace Jerome when his term ends in May has raised concerns among some Fed watchers about political closeness to the WHITE House. Kevin addressed that directly, saying on CNBC last week that Fed independence is “really important.”
Trump said in a prime-time address last week that he will announce his Fed chair nominee soon. He said the choice will be someone who strongly supports lower interest rates.
The speech focused on affordability pressures facing households. A CBS News/YouGov poll published Sunday showed Trump’s economic approval rating at 37%.
When asked about that figure, Kevin said public opinion often lags behind economic performance. “In the end, it turns out that I think it has a lot to do with news coverage and how people are processing, their glimpse of the outside world,” Kevin said.
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