No excuse to raise rates, Warsh will push Fed to right answer
National Economic Council Director Kevin Hassett said Wednesday he doesn’t see any argument for raising interest rates in light of the latest data on the U.S. economy, including a “surprising” inflation report.
“There’s no excuse for raising rates right now,” Hassett said on CNBC’s “Squawk Box.”
He said he expects the Fed to “think another way” if the data trends continue, meaning it will lower interest rates.
Hassett added that the White House expects Fed Chairman Kevin Warsh, who was chosen by President Donald Trump to take office at the end of May, “to guide the committee to the right answer.”
Hassett’s drive to cut interest rates dovetails with Trump’s persistent demand that the U.S. central bank quickly lower interest rates to stimulate the economy and make borrowing cheaper.
The economist’s appearance on CNBC came a day after the latest consumer price index reading, which measures the costs of a wide range of U.S. goods and services, came in much lower than expected.
In June, CPI fell a seasonally adjusted 0.4%, bringing the annual inflation rate to 3.5% and beating Dow Jones economists’ expectations, according to a Bureau of Labor Statistics report. This was the biggest drop in consumer prices in more than six years.
It was “one of the best inflation reports I’ve seen in my career,” Hassett said in an interview on Wednesday.
He credited Trump’s policies for this change and stated that the declines were not only related to the drop in oil prices due to developments in the US war against Iran.
“When I dug into it with my team, the story is that since President Trump has made law and order a big focus in big cities, it’s now a lot cheaper to buy insurance because people aren’t going to steal your car,” Hassett said.
But Warsh was less willing to step up the football following Tuesday’s report.
“There may be people who look at this morning’s data and say, ‘Oh, mission accomplished, everything’s great,'” the Fed chairman said in testimony before the House Financial Services Committee on Tuesday. “That’s not my opinion.”
