White House economic advisor Hassett: Fed has plenty of room to cut rates

Potential for Fed Rate Cuts

White House economic advisor Hassett stated that the Fed has plenty of room to cut rates during a Fox News interview. He indicated that further reductions may be necessary and that data could support a 50 basis point cut. His comments could influence market expectations, especially with key employment and inflation data set to be released soon.

Data-Dependent Stance

Hassett emphasized that the Fed's monetary policy remains data-dependent, yet other officials have leaned toward pre-emptive rate cuts, arguing that weaker growth and labor market risks in Q1 justify such action. The expectation is that inflation will drop significantly by 2026, reinforcing the case for early movement.

Selection of Next Fed Chair

The selection process for the next Fed chair is also underway, with Hassett being a leading candidate. Prediction markets have shown shifts, with Hassett's odds dropping from 88% last week to around 70%, while Warsh's odds have risen to 14%. These developments could have a significant impact on future Fed policy decisions. As crucial economic data approaches, the market remains attentive to how strong inflation or employment numbers could alter expectations.