• Former White House economist Kevin Hassett endorsed Jerome Powell's recent policy presentation as 'sound,' aligning with broad market consensus.
  • The Fed's neutral stance, holding rates at 4.25–4.50%, reflects a cautious 'wait-and-see' approach amid mixed economic signals.
  • While the S&P 500 is up 8.1% year-to-date, tariff-driven price pressures and business investment uncertainty continue to cloud the outlook.

Kevin Hassett, the former chairman of the White House Council of Economic Advisers, has publicly affirmed that Federal Reserve Chair Jerome Powell’s recent policy presentation was fundamentally "sound," a view that echoes the prevailing sentiment among many economists and market participants. This endorsement comes as the central bank maintains a steady, neutral policy course, opting for caution in the face of persistent inflation pressures and an irregular economic growth pattern.

Powell’s remarks, delivered at the August symposium, emphasized that while inflation remains slightly elevated—partly due to recent tariff pressures—it has fallen significantly from its post-pandemic peak. He highlighted a robust job market but reiterated a commitment to a data-dependent approach, leaving the federal funds rate unchanged in a target range of 4.25% to 4.50% since June 2024. This stance, according to people familiar with the Fed's deliberations, is designed to provide flexibility as the central bank assesses risks from both sides: the potential for inflation to become unanchored versus the possibility of an economic slowdown.

Market reaction has been broadly optimistic, with the S&P 500 climbing 8.1% year-to-date, fueled by strength in large-cap technology and AI-related sectors. However, underlying economic data presents a more nuanced picture. After a decline in the first quarter, GDP rebounded with 3% annualized growth in Q2, driven largely by a reduction in imports—a direct consequence of higher tariffs—and steady consumer demand. Despite this growth, business confidence and investment have been dampened by ongoing uncertainty surrounding trade policy, according to recent economic surveys.

“What institutional investors are really focused on is regulatory and policy stability,” one market strategist noted, drawing a parallel to the factors that attract capital to other markets. The Fed’s own median projection for PCE inflation in 2025 has been revised upward from 2.5% to 3.1%, signaling ongoing concern about price stability and justifying its patient posture. Efforts to reach Hassett for further comment on his assessment were not immediately successful.

Without a clear signal that inflation is decisively moving toward the 2% target, the Fed would be reluctant to ease policy prematurely. The current environment recalls prior episodes where external shocks, like tariff changes, complicated the inflation picture and forced a cautious response from policymakers. The central bank's next moves will likely hinge on incoming employment data and clearer signs that tariff-related price pressures are either abating or becoming embedded.

Correction: An earlier version of this article misstated the month of the Fed's symposium; it was held in August.