Federal Reserve Chair candidate Hassett: The pace of interest rate cuts in the U.S. lags far behind other central banks

Hassett, who is considered a leading candidate for the position of Federal Reserve Chair, believes that the boom in artificial intelligence is driving economic growth while simultaneously lowering inflation, and that the U.S. is far behind other central banks in terms of interest rate cuts.

On Tuesday, Hassett, a senior economic advisor at the White House, stated that despite the U.S. economy's growth rate in the third quarter exceeding expectations, the Federal Reserve's pace of interest rate cuts is still not fast enough. He referred to the strong GDP data as "a wonderful Christmas gift for the American people."

Wall Street Journal mentioned that the U.S. Department of Commerce reported a significant growth of 4.3% in real GDP for the third quarter, marking the fastest growth rate in two years and surpassing the Dow Jones market expectation of 3.2%. Hassett attributed 1.5 percentage points of the growth to President Trump's tariff policies, which reduced the U.S. trade deficit.

Hassett emphasized that the boom in artificial intelligence is driving economic growth while putting downward pressure on inflation. He said:

If we look at central banks around the world, the U.S. is far behind in terms of interest rate cuts.

Hassett's remarks highlight the divergence between the White House and the Federal Reserve regarding the pace of monetary policy. The Federal Reserve cut interest rates by 25 basis points on December 10, marking the third rate cut of the year, but indicated that future cuts may slow down, with three Federal Reserve governors voting against the rate cut.

Economic Growth Attributed to Trade Policy and AI Investment

In an interview with the media, Hassett elaborated on the reasons behind the strong GDP data.

He emphasized that Trump's trade policies and investments in artificial intelligence are the main factors driving economic growth. Hassett stated:

This is indeed a very impressive number, a wonderful Christmas gift for the American people. The economic recovery is truly beginning to accelerate, with a large number of people returning to the labor market... If we maintain a 4% GDP growth rate in the New Year, monthly job growth will return to the range of 100,000 to 150,000.

Despite the strong economic performance in the third quarter, monthly job growth this year has significantly declined compared to last year. The Labor Department reported last week that non-farm payrolls increased by 64,000 in November, while October saw a decrease of 105,000.

Economists attribute this trend to Trump's crackdown on illegal immigration, which has led to a decrease in the immigrant population, as well as weak labor demand.

Reiterating the Need for Faster Rate Cuts by the Federal Reserve

As one of the four finalists to succeed Powell, Hassett reiterated the call for lowering the Federal Reserve's policy interest rate, believing that the productivity gains brought by artificial intelligence will lower inflation.

The Federal Reserve cut interest rates by 25 basis points at its December meeting, marking the third rate cut of the year. However, this decision faced the most opposition votes since 2019, with three Federal Reserve governors voting against it. After the meeting, Powell stated that the decision to cut rates was a "difficult choice."

Trump has repeatedly criticized the Federal Reserve for not cutting rates quickly enough. Hassett's candidacy has raised concerns among some Federal Reserve observers, who believe he is too closely aligned with the President. Hassett stated to the media last week that the independence of the Federal Reserve is "very important."

Last week, Trump stated in a national address that he would soon announce his nominee for Federal Reserve Chair, emphasizing that he would choose someone who "strongly believes in significant rate cuts."

Consumer Confidence Diverges from Economic Data

Another report released by the World Federation of Large Enterprises on Tuesday showed that U.S. consumer confidence worsened in December, with increased anxiety about employment and income.

A poll released by YouGov on Sunday indicated that Trump's approval rating on the economy is at 37%.

When asked about the decline in Trump's economic approval rating, Hassett stated that public sentiment is often unrelated to economic data. He said:

Ultimately, I think this is largely related to news coverage and how people process and understand the outside world.

Hassett pointed out that although consumer sentiment may not directly reflect economic indicators, consumers have reason to remain optimistic about slowing inflation and rising wages. He mentioned that Trump plans to announce a housing initiative sometime in 2026, but did not disclose specific details