① White House economic advisor Kevin Hassett supports Trump's view that U.S. inflation is low. He believes that, measured by a three-month average, the current inflation rate is about 1.6%, below the Federal Reserve's 2% target. ② Hassett shares Trump's dovish stance on monetary policy and believes the Federal Reserve has significant room to cut interest rates.
On Friday (December 19) Eastern Time, White House economic advisor Kevin Hassett publicly stated that President Trump's view that the US inflation level is low is correct, despite data, public opinion, and most economists holding different opinions on this view.
Federal Reserve Chairman Jerome Powell's term ends next May, and Hassett is currently one of the leading candidates to become the next Fed chairman. With Trump likely to announce his nominee soon, Hassett's statements will likely emphasize his shared dovish stance on monetary policy with Trump.
Is US inflation actually below the Federal Reserve's target?
Last Thursday, the U.S. government reported that the U.S. Consumer Price Index (CPI) rose 2.7% year-on-year in November. Although this figure was lower than the 3% reported in September and also lower than market expectations, it was still higher than the Federal Reserve's 2% inflation target.
However, Hassett argues that assessing inflation by annual comparisons is incorrect, and that more attention should be paid to price pressures over a three-month moving average. Hassett claims that if price pressures are measured using a three-month average, the current inflation rate is approximately 1.6%.
This means that, according to Hassett's view, price pressures in the United States have not exceeded the Federal Reserve's 2% target level; in fact, they are below it. Hassett added, "The president sees it that way too."
Of course, Hassett and Trump's views are not currently accepted by most Federal Reserve officials and economists. Many Fed officials remain concerned that U.S. price pressures are still too high, and some even oppose further interest rate cuts because persistent high price pressures and concerns that Trump's tariff policies could push up prices have not been dispelled.
Trump is clearly unaffected by these dissenting voices, repeatedly claiming that inflation in the United States is no longer a worrying problem and has been pushing hard for interest rate cuts. Last Wednesday, he even boasted in a public speech, "I'm bringing down those high prices, and very quickly."
"The Federal Reserve still has considerable room to cut interest rates."
Hassett also commented on the Federal Reserve Bank of New York. President John Williams Disagreements have been raised regarding the analysis of inflation. In an interview last Friday, Williams stated that he believes there were some technical issues with the compilation of the November CPI data, which could lead to a higher actual inflation rate than the figures suggest.
The Federal Reserve lowered its interest rate target by 25 basis points last week to between 3.5% and 3.75%. Williams added that he "does not feel a strong urgency to take further monetary policy action at the moment, because I think the rate cuts we have already made have put us in a very favorable position."
In fact, after the release of the US CPI data last week, many economists expressed similar views to Williams, namely that the US November data may have been "distorted" due to technical reasons related to the government shutdown.
However, Hassett responded, "John is a serious man. He understands there are technical difficulties with these figures because they were unable to conduct investigations in some areas due to disruptions caused by the government shutdown." "But when he sends his staff back to tell him the margin of error, he finds it to be good news...it means the Fed has a lot of room to cut rates."
(Article source: CLS)
