Hassett Sees Fed Inclined To Raise Rates If October Inflation Comes In Hot

• Kevin Hassett suggested the Federal Reserve could raise interest rates if October’s inflation data shows elevated pressure. 
• Hassett noted that a cooling trend in October prices would indicate that September's high figures were merely a temporary anomaly. 
• Federal Reserve Governor Lisa Cook and Cleveland Fed President Beth Hammack both cast dissenting votes in favor of lifting rates on Wednesday.

The White House expects the Federal Reserve to hike interest rates if consumer price pressures persist through the current month. 

National Economic Council Director Kevin Hassett stated that upcoming consumer price index (CPI) and personal consumption expenditures (PCE) reports will dictate the central bank's next moves.

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"If October comes out really high, then I think the Fed would probably appropriately act," Hassett said during a Bloomberg Television interview. He added that once the month's price metrics are published, the proper policy path will become evident.

The remarks follow recent economic figures showing core PCE inflation—which strips out volatile food and energy costs—rising at a 3.1% annual rate in September, while overall PCE inflation reached 3.6%. Both readings sit comfortably above the Fed’s official 2% objective. Hassett emphasized that if inflation cools down in October, September’s surge can be written off as a temporary "blip".

US Fed Independence

The White House downplayed concerns regarding potential friction within monetary policy leadership. Treasury Secretary Scott Bessent remarked on CNBC that a future rate hike would not automatically constitute a policy misstep, pointing to robust broader economic momentum.

Hassett similarly defended the integrity of the Federal Open Market Committee (FOMC) after two policymakers dissented during Wednesday's rate decision. Fed Governor Lisa Cook and Cleveland Fed President Beth Hammack both voted to increase borrowing costs.

Praising Fed Chairman Kevin Warsh for fostering an environment of transparent debate, Hassett said, "His committee has made a decision that looks very data-driven to us, and so I don't have a concern about the committee right now".

Fed Leaves Rates Unchanged In October

The Federal Reserve opted to keep its target interest rate steady on Wednesday, but financial markets focused on Chair Kevin Warsh's announcement of a structural shift in the frequency of future interest rate decisions. 

The central bank held interest rates steady at 3.75% to 4% amid elevated inflation and a strong job market. The Federal Open Market Committee approved the following statement for release by a 10–2 vote.

At the time of writing, the SPDR S&P 500 ETF (SPY), which tracks the S&P 500 index, was down 0.5%, while the Invesco QQQ Trust (QQQ) fell 1.5%. Retail sentiment around the S&P 500 ETF on Stocktwits shifted to ‘bullish’ from ‘neutral’. The iShares 20+ Year Treasury ETF (TLT) added 0.4%. 

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