Who is Kevin Hassett, Trump’s expected pick to lead the Federal Reserve?

Donald Trump, president of the United States, has announced his intention to appoint a new chair of the Federal Reserve.

One name is the clear favorite, Kevin Hassett, the director of the White House’s National Economic Council, despite Trump’s unwillingness to confirm his nominee.

On Wednesday, Kalshi’s prediction market predicted that Hassett would have received an 86 percent of the vote, up from 6 percent for Kevin Warsh and 4 percent for Michelle Bowman, a re-elected Fed governor.

Who is in charge of the Federal Reserve’s leadership?

The Fed is arguably the most significant financial institution on earth because it is the central bank of the world’s largest economy.

The Fed serves as a lender of last resort and plays a number of important roles in the US economy, including setting monetary policy, supervising and regulating banks, and promoting financial stability.

The Fed manages monetary policy, which is primarily controlled by setting interest rates, closely monitoring these processes.

The Fed’s policymaking committee convenes eight times annually to determine the federal funds rate, target interest rate, and short-term lending rates for commercial banks.

The committee’s final meeting for 2025 is scheduled for Tuesday and Wednesday of next week, when it is anticipated to come to a consensus on a 0.25 percent cut to the benchmark rate, which is currently set at 3.75 percent to 4.25 percent.

Because banks’ borrowing costs affect the interest rates they charge clients for mortgages, car loans, and other types of credit, the benchmark rate has far-reaching implications for the entire economy.

Interest rates are typically raised when the economy is struggling and raised when prices are rising too quickly by the Fed, who has the dual duty of encouraging employment and maintaining price stability.

Cheaper borrowing spurs economic growth and encourages business investment.

In contrast, higher borrowing costs help to slow down inflation and prevent economic activity.

What is the background of Hassett?

Hassett is one of the many names that has been considered for the top Fed position, but he stands out for how long he has been close to Trump.

After serving in his first administration as the head of the Council of Economic Advisers, an older, more research-oriented body than the National Economic Council, Hassett was appointed as Trump’s top coordinator on economic policy.

Hassett&nbsp briefly re-enter the White House as an advisor on the COVID-19 pandemic after departing the first Trump administration in 2019.

Importantly, Hasset has indicated that he favors lowering interest rates more frequently, something that Trump has vehemently demanded from Jerome Powell, the current Fed chairman, with mixed results.

Trump has argued that the possibility of his tariffs causing a return to high inflation is exaggerated, suggesting that the benchmark rate should be set at 1%.

Hassett claimed in an interview with Fox News last month that if he were Powell’s person, he would be “cutting rates right now.”

Hassett, a senior fellow at the Peterson Institute for International Economics, said he would likely push for faster rate cuts, though likely not at the preferred speed.

Gagnon told Al Jazeera, “I believe Hassett will try to lower the Fed’s policy interest rates, but probably not to the 1 percent level that President Trump has demanded.”

He would likely contend that the government’s deregulation plan and the rise in AI-related inflation give the country more room to grow.

Before and in between his stints as a Trump White House official, Hasset was a conservative think tank’s economist who wrote in-depth articles on tax and trade policy.

Hassett also advised Mitt Romney’s, George W. Bush’s, and John McCain’s presidential campaigns on economic issues.

The economist worked for the Fed’s research and statistics division and Columbia Business School before getting involved in politics.

Why is there so much controversy surrounding Hassett’s potential nomination?

Hassett’s standing as a Trump supporter has sparked some concerns about the Fed’s independence.

The US economy is largely viewed as having the ability to make its decisions without the influence of any political figures.

However, Trump’s repeated verbal attacks on Powell, who will serve until May, and his efforts to remove Lisa Cook, one of the Fed’s six other governors, over unproven allegations of mortgage fraud have already raised that expectation.

Anastassia Fedyk, an assistant professor of finance at the University of California Berkeley’s Haas School of Business, told Al Jazeera that her concerns about the Fed’s independence are “very real and valid.”

“It’s not just about Kevin Hassett being more in tune with President Trump than other Fed chairs were with their nominees.” The firing of Lisa Cook, the early attempts to end Jerome Powell’s term, and Kevin Hassett’s own declaration of support for those efforts also have contextual bearing.

However, if Hassett were to be chosen and then confirmed by the US Senate, he wouldn’t be able to run the Fed.

The policy committee of the central bank, which includes four members of Joe Biden’s former Democratic presidential candidate, makes its decisions by majority vote. It has 12 members.

Who will lead the Fed next will have the same challenging job of promoting jobs without causing higher inflation, according to David Wilcox, an economist with Bloomberg Economics and the Peterson Institute for International Economics.

“On the one hand, the jobs market appears to be deteriorating, but only gradually. On the other hand, inflation is still too high, notably above the Fed’s goal of 2 percent, according to Wilcox.

No one should pretend the choice is obvious, Wilcox added, “but there is plenty of room for reasonable people to disagree about how these competing considerations should best be balanced against one another.”

Source: Aljazeera