White House economic adviser Kevin Hassett criticized non-Trump-appointed Federal Reserve policymakers for pushing interest rate increases.

  • National Economic Council Director Kevin Hassett questioned why Fed policymakers are pursuing monetary tightening given a recent 2% core inflation rate. 
  • Hassett accused central bank officials who were not appointed by President Donald Trump of undermining Fed independence through public calls for additional rate hikes. 
  • Tensions at the central bank have flared as former leadership, including Jerome Powell and Michael Barr, remained on the Board of Governors after stepping down from their executive roles.

A senior White House official sharply criticized Federal Reserve officials on Wednesday, questioning their rationale for continuing to push for interest rate hikes despite subdued inflation, Bloomberg reported.

Speaking at an event hosted by Georgetown University, National Economic Council Director Kevin Hassett pointed to recent annualized core inflation tracking at 2% and challenged the central bank’s recent policy direction.

"Why are they hiking?" Hassett asked, adding that Fed Chairman Kevin Warsh is currently "managing an unusually partisan Fed.”

Hassett expressed frustration over departures from historical norms at the central bank. While Fed chairs and vice chairs typically step down from the Board of Governors once their leadership terms end, former Chair Jerome Powell and former Vice Chair for Supervision Michael Barr have retained their board seats.

Powell’s choice to remain as a governor followed conflicts with the Trump administration regarding monetary policy independence. Barr, who stepped down from his supervision post last year, also continues to serve as a governor.

Despite the internal debates, the Federal Open Market Committee (FOMC) voted unanimously last week to raise the benchmark interest rate, with Warsh, Powell, Barr, and all other voting members supporting the increase.

"I'm worried about why they did that," Hassett remarked regarding the rate move.

Fed’s Michael Barr, Sarah Collins And Alberto Musalem Call For Hikes

Federal Reserve Governor Michael Barr said on Wednesday that further monetary policy adjustments are likely following last week’s rate increase, as inflation remains above the Fed’s 2% target and risks to price stability have increased. 

Barr noted that “given changes to the economy, we were out of position” and said that last week’s 25-basis-point hike to a 3.75%-4% range was an adjustment in the right direction.  

Federal Reserve Bank of Boston President Susan M. Collins on Tuesday reaffirmed her commitment to curbing inflationary pressures, stating that she fully supported the central bank's recent decision to raise interest rates by 25 basis points. 

On Monday, St. Louis Fed President Alberto Musalem warned that the central bank may need to raise interest rates further to fully rein in price pressures, suggesting that monetary policy may still be providing stimulus to the economy despite a recent rate hike. 

Debates Over Federal Reserve Independence

Hassett said financial markets share his concerns after post-meeting comments from non-Trump appointees.

"The market is worried, too, because if you look today, then a lot of the people who weren't appointed by President Trump are giving speeches over the last couple of days, saying we need a lot more hikes," Hassett said, according to Bloomberg.

He said these public calls for further monetary tightening show that "there is still a lot of work to do to restore Fed independence," calling the task a top priority for Chairman Warsh.

Economic projections from the Fed's latest forecast indicate that 16 officials anticipate at least one more rate hike before the end of the year.

U.S. equities dropped on Wednesday following the hawkish tones. The SPDR S&P 500 ETF (SPY) was down 0.7%, the SPDR Dow Jones Industrial Average ETF (DIA) fell 0.7%, and the Nasdaq-100 tracking Invesco QQQ Trust (QQQ) dropped 0.8%. The iShares 20+ Year Treasury ETF (TLT) fell 1.5%. 

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