I think that there’s a reasonable case to be made that [the Fed] hasn’t been as independent as it should be
Kevin Hassett, Chairman of the Council of Economic Advisers in the Trump administration from 2017 to 2019
The person Donald Trump might choose to run the Federal Reserve has supported the bank’s big interest rate cut in September, even though Trump has said that the decision was political.
Kevin Hassett, who led the Council of Economic Advisers during Trump’s presidency from 2017 to 2019, agreed with Trump that the Fed has been politically active in the past few years.
Hassett told the Financial Times that the Fed’s decision to lower its key interest rate by 0.5 percentage points instead of the usual quarter point was based on evidence that the U.S. job market was getting weaker.
Currently, Hassett is a fellow at the Hoover Institution at Stanford University. If Trump wins the election, he could be a candidate to be the next Fed chair when Jerome Powell’s term ends in 2026.
Hassett told the FT’s Unhedged newsletter, “The most recent move to start lowering rates made a lot of sense based on the data that they had at the time.” “It did look like things were slowing down very quickly.”
Before the big interest rate cut by the Fed, Trump spoke out against it at the Detroit Economic Club in early October.
Trump said, “The Federal Reserve lowered interest rates a bit too quickly.” He also said, “It was too big of a cut, and everyone knows that was a political move they tried to make before the election.” This meant that he thought the Fed was trying to lower interest rates on loans to help Kamala Harris, the Democratic candidate for president.
In the past, Trump has said bad things about Powell. For example, in 2019, he wanted the Fed to lower interest rates before the 2020 elections.
Hassett said, “I think there’s a reasonable case to be made that [the Fed] hasn’t been as independent as it should be.” He used the example of the central bank’s decision to raise interest rates in December 2016, just before Trump’s inauguration, even though data showed that it was “not supportive of a hike.”
Later, he said, “when there was a fiscal policy blowout with a fully Democratic government, the Fed didn’t do anything to fix it.”
But Hassett played down worries that Trump would try to weaken the Fed’s independence if he was elected president again.
It was said, “I am sure that President Trump supports the independence of the central bank. But he also wants to be heard, and he wants people there who are truly independent.”
It has never been true, according to the Fed, that politics affect US monetary policy.
The Fed lowered interest rates by a half-point last month. They are likely to do it again after the November elections and again in December.
Hassett said, “I wouldn’t give them a bad grade for the September move, but looking back, it looks like they probably wish they hadn’t done it.”
