Hassett: Warsh ‘not asking the White House for advice’ on interest rates

Hassett: Warsh ‘not asking the White House for advice’ on interest rates

Hassett - Kevin Hassett, director of the National Economic Council (NEC), clarified on Monday that Federal Reserve Chair Kevin Warsh is not seeking guidance from the White House when making decisions on monetary policy. This statement came during a televised interview on CNBC’s “Squawk Box,” where Hassett emphasized the independence of the central bank under Warsh’s leadership.

“We’re very close friends,” Hassett said on CNBC’s “Squawk Box,” referring to Warsh.

Despite their personal rapport, Hassett noted that the relationship between Warsh and the administration remains professional. “We’ve known each other for 30 years. … We definitely talk,” he added during the segment, addressing host Joe Kernen. However, Hassett made it clear that Warsh’s approach to interest rates is self-directed, free from White House influence.

Warsh assumed his role as Fed Chair in late April, succeeding Jerome Powell, who continues to serve on the central bank’s board of governors and is one of 12 voting members of the Federal Open Market Committee (FOMC). The FOMC’s recent decision to maintain interest rates at 3.5 percent to 3.75 percent underscored the continuity of policy direction, even as leadership changed. This unanimous vote marked the first meeting of Warsh’s tenure, reinforcing the committee’s commitment to stability amid evolving economic conditions.

President Trump, who has historically clashed with Powell over monetary decisions, expressed confidence in Warsh’s independence. Earlier this month, Trump highlighted his support for the new chair during an appearance on NBC’s “Meet the Press,” stating that the Fed should prioritize rate cuts. “Kevin is fantastic, and I want him to do whatever he wants,” Trump told host Kristen Welker. “I don’t want to have a big influence on him.”

While Trump advocates for lower rates, the FOMC’s decision to hold them steady reflects broader economic considerations. The central bank cited inflation as a key factor in its stance, noting that the current rate range aligns with its assessment of price stability. Inflation, which reached a three-year peak in May at 4.2 percent year-over-year, has since eased, though it remains above the Fed’s 2 percent target. This trend was evident in February, when annual inflation stood at 2.4 percent, indicating a gradual but persistent upward pressure on prices.

The FOMC’s projections, released alongside its voting decision, revealed a split among officials regarding future rate movements. Nine members anticipated at least one rate hike this year, while eight forecasted rates to remain unchanged through 2026. One official, however, suggested the possibility of a single rate cut, highlighting the uncertainty that still lingers in the policy landscape.

Hassett praised Warsh’s leadership, calling it a “huge amount of progress” in modernizing the Federal Reserve’s approach. “You can see that he’s organizing the Fed to make sure that… there are new procedures, new ways of thinking about things, inspection of old models and so on, so that we never get back to a situation where the Fed’s not moving and we got 9 percent inflation,” Hassett explained to Kernen, referencing the inflation spike of 2022.

Warsh’s shift in strategy was further evident during his press conference following the FOMC’s vote. He signaled a departure from the traditional practice of forecasting policy outcomes, choosing instead to focus on real-time market feedback. “When all the financial markets are doing is reflecting back what we’ve said, then we’re taking the most important source of information and we’re being blind to it,” Warsh told reporters, underscoring his belief in adaptive decision-making.

The move to abandon explicit projections aligns with Warsh’s emphasis on flexibility. By allowing markets to shape expectations, he aims to refine the Fed’s communication and avoid rigid adherence to preordained plans. This approach could influence how the central bank interacts with the public and financial institutions, fostering a more dynamic response to economic changes.

Warsh’s tenure also faces scrutiny in the context of past Fed decisions. During his first meeting, the central bank’s choice to keep rates steady contrasts with the 0.25 percentage point cuts that occurred in the final three meetings of 2025, when Powell was chair. Trump had previously criticized Powell for not accelerating rate cuts, arguing that the Fed’s hesitance contributed to rising inflation. Now, with Warsh in charge, the administration hopes to see a more proactive stance, even as the new chair prioritizes independence.

The White House’s relationship with the Fed has long been a point of contention. While Trump insists on supporting Warsh’s autonomy, the administration’s economic advisors continue to monitor the central bank’s actions closely. Hassett, who has previously advocated for market-based policies, sees Warsh’s leadership as a bridge between the White House and the Fed, ensuring that policy decisions are both independent and aligned with broader economic goals.

Looking ahead, the FOMC’s decision to hold rates steady may set the stage for future adjustments. With inflation still above target and economic data fluctuating, the central bank remains cautious. Warsh’s emphasis on listening to market signals suggests a potential pivot toward data-driven decisions, which could reshape the Fed’s communication strategy and influence public perception of its role.

As the Fed navigates its new direction under Warsh, the balance between independence and collaboration with the executive branch will be critical. Hassett’s reassurance that the White House is not steering Warsh’s decisions highlights this separation, but the ongoing dialogue between policymakers and market participants ensures that external factors will continue to play a role in shaping the central bank’s path forward.