Kevin Hassett, director of the White House National Economic Council and a leading candidate to chair the Federal Reserve after Jerome Powell’s term ends, has made a notable assessment of the current outlook for the U.S. economy.
Hassett painted an optimistic outlook for growth, employment, inflation and monetary policy.
Hassett said the strong growth in the U.S. economy is based on a combination of falling prices and rising incomes, a combination that supports economic activity. Mr Hassett argued that people were very optimistic about income growth, and that this optimism led to an increased willingness to spend, boosting growth rates. He also noted that the productivity gains from artificial intelligence are clearly reflected in economic data, adding that developments in this field are giving new momentum to the U.S. economy.
Touching on employment, Hassett said that if gross domestic product (GDP) growth remains at around 4%, monthly employment growth could return to the 100,000-150,000 range. While Mr Hassett maintained there was no strong correlation between consumer confidence and “bleak” economic data, he said consumers nevertheless now had a more positive outlook on their economic future.
On monetary policy, Hassett criticized the Fed, calling it “outdated” when it comes to cutting interest rates. Hassett described the recently released growth numbers as a “Christmas present to the American people” and said they clearly demonstrate the strength of the economy. He also argued that progress has been made in fiscal discipline, noting that the U.S. budget deficit has been reduced by about $600 billion annually.
Hassett also touched on housing policy, saying that President Donald Trump is considering a number of options to increase access to housing, and that a new housing plan will be announced within the next year. Hassett said steps taken in trade policy are also beginning to yield concrete results.
Meanwhile, Treasury Secretary Scott Bessent said the Fed could revise its 2% inflation target as inflation approaches the 2% level again. Bessent said on the “All In” podcast that if inflation reaches 2%, it might be more prudent to set the target in a range, such as 1.5-2.5% or 1-3%, rather than a single point. Mr. Bessent argued that setting targets with decimal precision was unrealistic and warned that changing the target when inflation is high could give the impression that the target is constantly being raised. These comments were reportedly made after the release of November inflation figures.
*This is not investment advice.
