White House NEC Director Kevin Hassett Talks Inflation, Fed

Kevin Hassett · White House National Economic Council

Warsh will respond more to inflation data than to strong growth, so growth alone should not force tightening.

Hassett says the White House believes Warsh had it right that supply-driven growth is not inflationary. He says Warsh has publicly stated he will watch inflation data 'like a hawk' and respond more to that than to growth. Given the strong supply-driven growth and productivity, Hassett implies the Fed should not tighten because of growth. He declines to say whether he discussed rate cuts with Trump.

“he's gonna watch the inflation data and watch it like a hawk and respond more to that than to growth when we're seeing such high growth that's potentially supply shock driven and productivity driven.”at 3:19

Kevin Hassett · White House National Economic Council

White House will deliver an evidence-based report on Lisa Cook to Trump through a fair process.

Hassett says the White House counsel's team has set up an orderly, fair process and is negotiating with Governor Cook to schedule a meeting where the evidence can be laid out. The resulting report goes to the president for a decision, and nothing in the schedule is changing. He says he would not have taken part unless he had confidence that he could vote with his conscience and dissent if he disagreed with the other commissioners.

“We're gonna put the evidence on the table, and then we're gonna have an evidence based report that we present to the president”at 9:16

Kevin Hassett · White House National Economic Council

The job market is firing on all cylinders, with low claims, rising quits and big upward revisions.

Hassett calls it one of the better jobs weeks he has seen. Initial jobless claims fell to about the lowest level since World War II, and job openings were high. The quit rate rose, which he reads as workers confident they can find better jobs. The latest jobs report beat expectations by more than double, and upward revisions to the prior two months were very large. He concludes the labor market is strong on every measure.

“And now we have a jobs report that was way more than double expectation, and the upward revisions were ginormous for the last couple of months. And so what we've got is a job market that's hitting it all cylinders.”at 2:28

Kevin Hassett · White House National Economic Council

Strong US growth is supply-driven and productivity-led, so it is not necessarily inflationary.

Hassett argues, citing Kevin Warsh's framing, that supply-side growth is not necessarily inflationary while demand-side growth is. He credits expensing for capital goods for boosting supply, pointing to 120,000 people building new factories in the jobs report as a 'big positive supply shock.' He adds that productivity was 'through the roof' that week, so the high growth is supply and productivity driven and should not stoke inflation.

“if you have supply side growth, then it's not necessarily inflationary. And if you have demand side growth, then, of course, it is.”at 2:53

Kevin Hassett · White House National Economic Council

The Iran situation is driving energy prices, which is a real spike feeding into headline inflation.

Hassett attributes the top-line inflation numbers to energy prices that are related to the situation in Iran, which the president says he has no regrets about. He calls the energy price spike 'real' and says it infects inflation readings up and down, for example through airfares. He presents this as the main driver of headline inflation, separate from the core trend, which he says is improving.

“the top line inflation numbers are, of course, being driven by energy prices, which are related to the situation in Iran that the president says he has no regrets about.”at 6:12

Kevin Hassett · White House National Economic Council

Inflation is decelerating, with core near the Fed's target; the headline spike is energy-driven.

Hassett argues inflation is coming down and the White House's policies are working. He cites the last CPI report, saying core inflation was back around the Fed's target for the previous three months. He attributes the top-line figure to energy prices tied to the Iran situation, and says supply-side policies put downward pressure on inflation, with food prices (eggs down, beef down four of the last five months) also falling. He concedes inflation is coming down from a high level, after a Biden-era surge that he blames on post-COVID helicopter money, so the frustration people feel is real but progress is being made.

“if you look at what happened prior to the last CPI, then core inflation was back to around the Fed's target for the previous three months.”at 6:27

Kevin Hassett · White House National Economic Council

Food prices are falling, with egg prices way down and beef down four of the last five months.

Hassett says the administration has done an enormous amount to lower food prices. He points to egg prices being way down, a reversal of what reporters used to ask about, and beef prices falling in four of the last five months. He offers these as evidence that the policies are easing the inflation burden, though he concedes the cumulative price level is still high.

“Food prices, we've done an enormous amount to lower food prices... Beef prices are down four out of the last five months.”at 7:48