Will it be Kevin Warsh or Kevin Hassett?
The Wall Street Journal reports Trump Says He Is Leaning Toward Warsh or Hassett to Lead the Fed
In an interview with The Wall Street Journal in the Oval Office on Friday, the president said Warsh was at the top of his list. “Yes, I think he is. I think you have Kevin and Kevin. They’re both—I think the two Kevins are great,” he said. “I think there are a couple of other people that are great.”
Hassett has been increasingly viewed as the front-runner after Trump repeatedly teased in recent weeks that he had settled on his choice to lead the Fed, but Trump’s comments suggest Warsh remains solidly in contention.
During a 45-minute meeting with Warsh on Wednesday at the White House, the president pressed Warsh on whether he could trust him to support interest-rate cuts if he were chosen to lead the central bank, according to people familiar with the meeting. Trump, in the Journal interview, confirmed that reporting.
“He thinks you have to lower interest rates,” Trump said of Warsh. “And so does everybody else that I’ve talked to.”
Asked where he wants interest rates to be a year from now, Trump said, “1% and maybe lower than that.” He said rate cuts would help the U.S. Treasury reduce the costs of financing $30 trillion in government debt.
“We should have the lowest rate in the world,” he said.
“I won’t have anybody on the Federal Reserve that when you have good news, that means you automatically raise interest rates through the roof in order to kill inflation,” Trump said. “If you have lots of good news, they will do everything they can to stop it, because they’re so afraid of inflation.”
Kevin!
One Requirement for the Job
There is one and only one requirement for the job, any job within the administration, and every Trump appointment: If I can be blunt, Kiss Trump’s ass, regardless of economic consequences.
Warsh is trying to convince Trump he is up to the task.
I am sure Hassett is fully on board. But is Warsh a sincere ass kisser? I don’t know and I don’t think we will find out.
The Rate Cut Debate
Meanwhile, please note Fed Officials Spar Over Whether Rate Cuts Risk Credibility on Inflation
The central bank voted 9-3 Wednesday to cut its benchmark rate by a quarter point, to a range between 3.5% and 3.75%. Two voters favored no cut, and one preferred a larger reduction. It was the first time since 2019 that three policymakers had formally dissented.
One of this week’s dissenters, Kansas City Fed President Jeff Schmid, said Friday morning he opposed cutting rates because he doesn’t see evidence that interest rates are putting downward pressure on inflation by slowing economic activity, on balance.
“Right now, I see an economy that is showing momentum and inflation that is too hot, suggesting that policy is not overly restrictive,” he said. Schmid also dissented in October.
Chicago Fed President Austan Goolsbee, who also voted against cutting, suggested his disagreement centered more on tactical considerations. He backed cuts in September and October and said Friday he thought the Fed could continue lowering rates but didn’t want to move so aggressively because inflation has been stubborn.
“If we can just get the dust out of the air, fundamentally, rates can go down a fair amount from where they are today,” Goolsbee said at a conference in Chicago.
The central bank voted 9-3 Wednesday to cut its benchmark rate by a quarter point, to a range between 3.5% and 3.75%. Two voters favored no cut, and one preferred a larger reduction. It was the first time since 2019 that three policymakers had formally dissented.
One of this week’s dissenters, Kansas City Fed President Jeff Schmid, said Friday morning he opposed cutting rates because he doesn’t see evidence that interest rates are putting downward pressure on inflation by slowing economic activity, on balance.
“Right now, I see an economy that is showing momentum and inflation that is too hot, suggesting that policy is not overly restrictive,” he said. Schmid also dissented in October.
Chicago Fed President Austan Goolsbee, who also voted against cutting, suggested his disagreement centered more on tactical considerations. He backed cuts in September and October and said Friday he thought the Fed could continue lowering rates but didn’t want to move so aggressively because inflation has been stubborn.
“If we can just get the dust out of the air, fundamentally, rates can go down a fair amount from where they are today,” Goolsbee said at a conference in Chicago.
Recent divisions reflect a dilemma the Fed hasn’t faced in more than 15 years: stubborn inflation that calls for higher rates paired with a softening job market that suggests a need for lower rates. “So what do you do?” Powell said Wednesday. “You’ve got one tool. You can’t do two things at once.”
CME Fedwatch Odds
As of today, CME Fedwatch data shows there is a 75.6 percent chance the Fed stands pat in January.
I have no idea because we do not have enough data.
But the next meeting is not until January 28. By then we will have November and and December data.
The BLS will report December CPI data on January 13, and jobs data on January 9. Those two reports can dramatically change the odds.
Powell Blames Tariffs for Inflation, Says Job Growth Is Negative
On December 10, I reported Powell Blames Tariffs for Inflation, Says Job Growth Is Negative
In the press conference, Powell blamed tariffs and said the BLS overestimated jobs.
And in case you missed it, please note President Trump Promised a Manufacturing Boom. Where Is It?
The answer is China.
