Kevin Hassett Reportedly Says 'It's A Good Time' For Fed To Reduce Rates Cautiously

• Hassett’s comments come amid growing expectations of a 25 basis point rate cut next week.
• According to data from the CME FedWatch tool, there is a 87.2% probability of a 25 bps cut.
• Morgan Stanley on Friday joined JPMorgan and Bank of America, expecting a rate cut next week and reversing its previous stance that the Fed would pause following the cuts in September and October.

National Economic Council Director Kevin Hassett reportedly said on Friday that now is a “good time” for the Federal Reserve to cut rates cautiously, days ahead of the Federal Open Market Committee (FOMC) meeting.

During an interview with Fox Business, Hassett stated that he expects the Fed to cut rates next week. “It’s a good time for the Fed to cautiously reduce rates again,” he said.

The NEC Director is currently among the frontrunners to succeed Fed Chair Jerome Powell, whose term expires in May next year. 

Hassett’s comments come amid growing expectations of a 25 basis point rate cut next week. According to data from the CME FedWatch tool, there is a 87.2% probability of a quarter-point cut.

Morgan Stanley on Friday joined JPMorgan and Bank of America in expecting a rate cut next week, reversing its previous stance that the Fed would pause following the cuts in September and October.

US Economy’s Prospects

Hassett stated in the interview that while the U.S. government shutdown had a bigger negative impact on the economy than expected, he projected a “bigger rebound in the first quarter.”

He also added that, because of the “big increase” in productivity from AI, the U.S. could see a 4% productivity increase in 2026. As for AI’s impact on jobs, Hassett said that the technology is “like you got a coach with you every step of the way.”

Residency Requirement For Fed Presidents

Hassett also backed Treasury Secretary Scott Bessent’s calls for regional Fed Presidents to have lived in their respective districts for at least three years.

“The reason we have all these regional Feds is that we want to make sure that we have a federalist system,” he said in the interview, supporting the idea of these regions having a voice at the table.

“The unfortunate thing about the current design of the Federal Reserve is that the only folks who always get a vote on interest rates are the people who live in Washington and the people who live in New York,” Hassett added, while noting that this requirement would not result in the replacement of anyone currently at the Fed.

Meanwhile, U.S. equities gained in Friday morning’s trade. At the time of writing, the SPDR S&P 500 ETF (SPY), which tracks the S&P 500 index, was up by 0.35%, the Invesco QQQ Trust ETF (QQQ) gained 0.5%, while the SPDR Dow Jones Industrial Average ETF Trust (DIA) rose 0.32%. Retail sentiment around the S&P 500 ETF on Stocktwits was in the ‘bearish’ territory.

The iShares 7-10 Year Treasury Bond ETF (IEF) was down by 0.13% at the time of writing.

Also See: Ahead Of PCE Data Release, Here's What CME FedWatch Is Indicating About December Fed Rate Cut Chances

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