Trump's Fed Gambit: Hassett's Cuts Clash with Central Bank Caution

President Donald Trump has moved closer to naming Kevin Hassett as his preferred candidate to succeed Jerome Powell as Federal Reserve chair, with the National Economic Council director indicating he would accept the nomination if offered. Hassett, a prominent advocate for aggressive rate cuts, told Bloomberg in an interview that he supports reducing the Fed's benchmark interest rate by 50 basis points at its December meeting, aligning with Trump's long-standing calls for lower borrowing costs. The president, who has publicly criticized Powell for delaying rate reductions, hinted on Tuesday that he has already settled on a replacement, though he did not name names. Treasury Secretary Scott Bessent, leading the search, has narrowed the list to candidates including Hassett, current Fed Governor Christopher Waller, and BlackRock's Rick Rieder according to Bloomberg reporting.

Hassett's potential nomination underscores Trump's preference for a Fed chair who shares his economic priorities. In his interview, Hassett emphasized his willingness to challenge the Fed's current approach, which he argues has become "uncomfortably correlated with what a partisan might do." He criticized the central bank's research division for lacking cutting-edge forecasting tools and pledged to overhaul it if appointed. His remarks contrast with Powell's cautious stance, which has prioritized maintaining monetary independence amid Trump's pressure to cut rates.

The political calculus of the nomination remains complex. Hassett acknowledged the risks of a rushed confirmation process, noting that a premature appointment could lead to "a long period of confirmation struggles that can be pretty ugly." He cited his previous bipartisan confirmation experience in 2017 as a potential advantage, though the current polarized climate complicates the path forward. Meanwhile, Trump has faced internal resistance to removing Powell immediately, with aides cautioning against destabilizing the Fed's leadership ahead of its May 2026 term expiration.

The Fed itself is navigating a delicate balancing act. While some officials, including Governor Christopher Waller, have advocated for rate cuts due to a weakening labor market, others, like Cleveland Fed President Beth Hammack, argue that policy must remain "somewhat restrictive" to combat persistent inflation according to Forbes analysis. The central bank's December decision will hinge on whether economic data justifies a shift, with markets split on whether the Fed will cut rates or hold steady.

Trump's push for a more dovish Fed aligns with his broader economic agenda, which includes slashing tariffs and addressing inflation. Hassett, who previously served on the Fed's board, has framed his approach as a blend of market-driven policies and structural reforms to reduce costs for consumers according to AP reporting. However, critics like economist Ryan Cummings argue that Trump's focus on short-term rate cuts risks exacerbating inflationary pressures without addressing deeper affordability issues in housing, healthcare, and education.

As the administration finalizes its decision, the chosen candidate will face the challenge of balancing Trump's demands with the Fed's mandate to ensure long-term economic stability. With Bessent expected to deliver recommendations after Thanksgiving, the White House's next move will shape the trajectory of U.S. monetary policy for years to come.