What Kevin Hassett Can Bring to the Federal Reserve

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00:00Give us your response, your thoughts on Kevin Hassett as the next potential Fed chair.

00:06Yeah, well, I mean, I think he's seen by markets as the candidate that is closest to the administration

00:12in terms of their views on interest rates.

00:15And that is, you know, it's clearly more dovish than the central, you know, the consensus on the committee right now.

00:22You know, just in terms of the outlook for him, you know, it's no guarantee that Powell will step down

00:28from the board when his chairmanship ends in May.

00:34So we think the administration will probably want to install whoever they want to be their next Fed chair

00:39when Steve Myron's, you know, kind of short stub seat ends in January.

00:47So we think that they will try to do that.

00:49If they want Kevin Hassett, you know, genuinely to be the next chair,

00:52he could be installed as soon as when the Myron seat expires.

00:58You know, but when he gets on the committee, you know, there's still a big question on can he convince

01:02the other members of the FOMC in his views and to lower interest rates if that is indeed his views.

01:09So, you know, the committee is, you know, is a democratic process and he will have to have some intellectual heft

01:15in terms of convincing the others on the committee, you know, if he wants to make material adjustments

01:20to the Fed funds rate.

01:21I think it's fair to say, Tiffany, that markets like Federal Reserve and central bank independence,

01:27regardless of where we're talking about around the world.

01:31I'm wondering about the delicate dance that Scott Besson, the Treasury Secretary, and that President Trump

01:36have to do to pick somebody who is respected by markets and viewed as independent,

01:43but also viewed by the president as somebody who will put his policies into action.

01:47Because I would imagine if somebody has chosen who might lower interest rates in an environment where interest rates

01:53really shouldn't be lowered, we would see some serious pushback when it came to bond market.

01:59Yeah. I mean, I think one of the other stated goals of this administration, you know,

02:04and Scott Besson in particular, is to just to ensure that that all interest rates are moving lower.

02:11You know, they do see it as a constraint on the economy.

02:14And they've they've all talked about, you know, not only the just the Fed funds rate,

02:19just but overall interest rates moving lower.

02:21You know, I do think there's a question around if that goal would be achieved.

02:25If you had a chair and an FOMC that was, you know, reducing interest rates at a level that got the markets concerned

02:36about inflation risks and about, you know, kind of longer term, you know, kind of longer term credibility questions.

02:43And in that environment, it's certainly possible that even though the Fed funds rate could be falling

02:48and shorter dated Treasury yields could be falling, the longer end could could actually be rising

02:53as the markets are pricing in more term premium and more risk associated with with that sort of credibility,

02:59those credibility questions. You know, so it's no guarantee that reducing the funds rate will reduce long and yield.

03:04So I think that the administration certainly has to be cognizant of that as well.