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A leading candidate for Federal Reserve chair under a potential second Trump administration has pledged to maintain the central bank’s independence while acknowledging he would present the president’s views to monetary policymakers.
Kevin Hassett, speaking Sunday on CBS News’ “Face the Nation,” addressed concerns about Federal Reserve autonomy by drawing a clear line between presidential input and monetary policy decisions. When asked if President Donald Trump’s opinions on interest rates would carry equal weight with members of the Federal Open Market Committee, Hassett was unequivocal.
“No, he would have no weight,” Hassett stated. “His opinion matters if it’s good, if it’s based on data. And then if you go to the committee and you say, well, the president made this argument and that’s a really sound argument, I think, what do you think? If they reject it, then they’ll vote in a different way.”
Hassett’s comments come at a critical juncture as Trump reportedly conducts final interviews with potential replacements for current Fed Chair Jerome Powell, whose term expires next May. Trump has made no secret of his desire for dramatically lower interest rates, saying the Fed’s current benchmark rate of approximately 3.6% should be slashed to 1% or lower—a position at odds with mainstream economic thinking.
The Wall Street Journal reported Friday that Kevin Warsh, a former Fed governor and current fellow at Stanford’s Hoover Institution, is Trump’s current favorite to replace Powell. However, Trump has previously indicated Hassett is also in serious contention, telling the Journal, “I think the two Kevins are great.”
The discussion around Fed leadership has reignited debate about central bank independence, a principle widely accepted by economists and financial markets. Before Trump’s first term, presidents from both parties had largely maintained a decades-long tradition of avoiding public commentary on monetary policy decisions, recognizing that political pressure could compromise the Fed’s ability to make sound economic judgments.
This tradition exists because economists broadly believe that a politically independent Federal Reserve is more effective at controlling inflation, as it can implement unpopular measures like interest rate hikes when necessary to maintain price stability. The autonomy of the central bank has been considered critical to maintaining market confidence and economic stability.
Trump, however, has repeatedly broken with this tradition. On Friday, he reasserted his belief that he should have input on monetary policy, saying, “I’ve done great. I’ve made a lot of money, I’m very successful. I think my voice should be heard.”
Trump’s approach to the Fed during his first term included unprecedented public criticism of Powell, whom he himself had nominated. The president’s frequent calls for lower rates and public rebukes of Fed decisions raised concerns about political interference in monetary policy.
Hassett, who previously served as chairman of Trump’s Council of Economic Advisers, attempted to address these concerns in his CBS interview by emphasizing the institutional safeguards built into the Federal Reserve System.
“In the end, the job of the Fed is to be independent,” Hassett said, highlighting the committee-based decision-making structure that distributes power beyond the chair. “In the end, it’s a committee that votes.”
He added with a touch of humor that reflects his longstanding relationship with Trump: “I’d be happy to talk to the president every day until both of us are dead because it’s so much fun.”
The selection of the next Fed chair holds significant implications for U.S. monetary policy at a time when inflation remains above the central bank’s 2% target and the economy faces uncertainty. Financial markets will be watching closely for signals about whether the next chair will maintain the Fed’s traditional independence or usher in a new era of monetary policy more responsive to White House preferences.
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8 Comments
This highlights the ongoing tensions between the executive branch and the Fed. Hassett’s comments suggest he would try to bridge that gap, but the Fed’s credibility hinges on maintaining its independence.
You’re right. The Fed has to be able to make decisions based on data and analysis, not political pressure. It will be important to see how they navigate this if Hassett is nominated.
This is a tricky balancing act. The president has a right to provide input, but the Fed must retain its autonomy. Hassett’s comments suggest he understands this, but the real test will be how it plays out in practice.
The Fed’s ability to reject presidential views is critical for its credibility. Hassett seems to acknowledge this, but it remains to be seen how a potential Trump administration would actually handle it in practice.
Interesting to see how the Fed would handle a potential Trump nominee like Hassett. They’ll need to balance presidential input with their own independence in setting policy. Curious to see how this plays out.
Indeed, the Fed’s autonomy is crucial to ensure sound monetary policy. It will be a delicate balancing act if Trump tries to exert influence over the central bank.
Maintaining the Fed’s independence is essential, even if a Trump nominee like Hassett is installed. The central bank has to be able to make decisions free from political interference.
Absolutely. The Fed’s credibility and effectiveness hinge on its ability to set policy objectively. Any appearance of political influence could undermine public trust in the institution.