9 Dec (Reuters) – White House economic advisor Kevin Hassett, the favorite to be the next chair of the Federal Reserve, told the WSJ CEO Council on Tuesday that there is ‘plenty of room’ to reduce interest rates further, although he added that if inflation rises, the calculation could change.
“What we have to do is recognize that, like the 1990s, we are in a time of potentially extreme transformation,” Hassett said on the WSJ CEO Council, referring to the possibility that artificial intelligence could boost economic growth without overheating the economy.
Asked what he would do if President Donald Trump wants him to lower interest rates and he doesn’t think it’s the right thing to do, he said he would stick to “my judgment, which I think the president trusts,” according to Bloomberg News.
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‘If inflation goes from 2.5% to 4%, it won’t be possible to cut rates,’ according to a tweet from Wall Street Journal Fed reporter Nick Timiraos.
The Fed began its last monetary policy meeting of the year this Tuesday and is expected to announce on Wednesday a 0.25 percentage point reduction in interest rates for the third time this year, but that it will signal little additional easing next year.
On Monday, Trump told Politico that he will make support for an immediate interest rate cut a litmus test in his selection of a new Fed chair. Hassett, echoing Trump’s own criticism of the Fed’s decision not to cut rates further, accused the central bank of acting politically.
“I think the Fed chair’s most important role is to analyze economic data and avoid being part of politics,” he said.
(Reporting by Ann Saphir)
