Bloomberg Talks
00:05:24 · S2, Kevin Hassett, S0
[00:05:24] S2: The reports do suggest that potentially post-election, that this is a president who will continue to take action and take action in Iran. Should we anticipate then that this blip does continue for some time if, again, reports suggest that more action and potentially an increase in the warfare there in the Middle East might continue post-midterms? Director Hassett. [00:05:46] S1: You know, I can't forecast what's going to happen to the war. I'm just a dichotomist. But what I can say is that the U.S. Navy has done a fantastic job at helping ships get through the straits. The Gulf countries are building backup pipelines to go around so that the Iranians continue to cause trouble, that it'll matter less and less. U.S. refineries are trying to increase capacity. We have plenty of crude, not enough refined product. And the Europeans, we just did a negotiation. The Europeans are releasing some of their strategic reserves of refined products. And so we're doing everything we can to minimize the disruption. And I think that the new infrastructure that's being built in the Middle East is going to make it hard for the Iranians to hold the world hostage again anytime soon. [00:06:30] S0: Director Hassett, let's go to the Fed, because yesterday the Federal Reserve held rates steady, and among those who dissented in favor of a hike is Governor Lisa Cook. So she directly opposed the administration's preferred direction for monetary policy. In your view, how can the White House defend the Fed's independence while pursuing the removal of Cook?
00:06:30 · S0, Kevin Hassett, S2
[00:06:30] S0: Director Hassett, let's go to the Fed, because yesterday the Federal Reserve held rates steady, and among those who dissented in favor of a hike is Governor Lisa Cook. So she directly opposed the administration's preferred direction for monetary policy. In your view, how can the White House defend the Fed's independence while pursuing the removal of Cook? [00:06:48] S1: Well, as you know, I'm part of a commission that has been carefully crafted after with reference to the Supreme Court ruling that is providing a report to the president on this matter. And so, therefore, at this time, I'm not able to comment on it. [00:07:01] S2: I do just wonder if you can't comment on that specifically. If sort of the approach has changed, though, if we could talk about overall approach, because I know you and I have talked before, Director Hassett, about this being a matter for law enforcement. Just the existence of this very council, does that mean that the White House and how they're viewing this matter has slightly changed?
00:07:01 · S2, Kevin Hassett, S0
[00:07:01] S2: I do just wonder if you can't comment on that specifically. If sort of the approach has changed, though, if we could talk about overall approach, because I know you and I have talked before, Director Hassett, about this being a matter for law enforcement. Just the existence of this very council, does that mean that the White House and how they're viewing this matter has slightly changed? [00:07:22] S1: What the White House is doing is that he's the president has asked a small set of his people to run a completely fair process that puts all the information on the table. And then the president will make a decide next steps. And, you know, I think that we in the White House, the White House Council has worked very collegially with Governor Cook's people. I think that they've agreed to date agreed to a date. in December to meet together and talk these things through. And so I think the process is moving forward in a collegial manner and really according to carefully scrutinized instructions really of how to do it right. [00:07:59] S0: Understood. [00:08:00] S2: I just want to clarify that this is not necessarily just a law enforcement matter, as you've said before. This is bigger and should necessarily involve the White House then. [00:08:10] S1: Yes, I think the president has decided it will involve the White House.
00:08:10 · Kevin Hassett, S2, S0
[00:08:10] S1: Yes, I think the president has decided it will involve the White House. [00:08:14] S2: All right, Director Hassett, on that specifically as well, we had, as Isabel mentioned, Governor Cook dissenting as well. We also had President Hammack also dissenting. You've said before that you fear that this is an FOMC that is political. Do you view those two actions of the dissenters equally as political then in the past yesterday's FOMC meeting? [00:08:37] S1: No, I think that Chairman Warsh has done a good job of allowing normal dissent and driving a consensus. And I think that 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. [00:08:53] S0: And sticking with the Fed, so the Fed says economy is good and they're holding rates steady, but if inflation is still running about 3% and inflation is high, why isn't the case for a high clear? [00:09:05] S1: Again, the question is, do you believe the numbers that we saw in the summer? Do we believe the GDP inflator, which came in really low today, has meaning? You know, we've got to make data decisions based on what data we have. And September was way above expectation. And if that's a new trajectory, then, of course, the Fed will have to act.
00:09:05 · Kevin Hassett, S2, S0
[00:09:05] S1: Again, the question is, do you believe the numbers that we saw in the summer? Do we believe the GDP inflator, which came in really low today, has meaning? You know, we've got to make data decisions based on what data we have. And September was way above expectation. And if that's a new trajectory, then, of course, the Fed will have to act. [00:09:26] S2: This is a Fed, though, that does seem to still be committed to something that might look like future hikes. I wonder what you think about that, Director Hassett. You said earlier this morning you think that there's room to let inflation essentially cool off. Will it be your contention, the White House's contention, that they will be making a mistake if they hike in December? And will that be, in your view, not a data-driven decision, but rather a politically-driven decision? [00:09:50] S1: No, I respect that Chairman Warsh is going to do the right thing. He's going to have the same data that you and I all talk about when we get the next CPI and PCE data. for October. And at that point, I think it'll be clear what the Fed should do. [00:10:04] S0: What is your response, Director Hassett, to those who say that if the president wants to appeal to consumers, then Fed rate hikes to bring down inflation are his best bet? [00:10:14] S1: Could you say that again? I'm sorry, I didn't understand your question. [00:10:17] S0: There are some people who say that if the Fed raises rates to bring down inflation, that's its best bet to appeal to consumers ahead of the midterm elections.
00:10:17 · S0, Kevin Hassett, S2
[00:10:17] S0: There are some people who say that if the Fed raises rates to bring down inflation, that's its best bet to appeal to consumers ahead of the midterm elections. [00:10:25] S1: Oh, you know, I think that if inflation goes down between now and the next election because of some Fed action, then that's not the Fed policy response that I'm used to seeing, having worked at the Fed for many years. It's a very, very slow-moving process. If you look at the 30-year TIP, the Inflation Protected Act, Treasury, it's expecting the Fed to get long-term inflation at around 2.1%. And that's the kind of long-term view that Fed governors need to have is to, you know, make sure that markets are reassured that they're going to hit their target. They're going to hit their target. But short-run responses are difficult to predict. [00:11:03] S2: Director Hassett, I would love to finish on this message, this one of reassurance, and just bring it back. to the three-person committee on Lisa Cook. Understood, you can't tell us where you are in that investigation, but I wonder if you could leave this market with some reassurance. What reassurance can you give that this will be a fair view into Governor Cook and what she was doing, that the White House panel will be fair given continued statements from the president to suggest that he is unhappy with the job Lisa Cook is doing and that she should no longer be there?