• Former Trump economic advisor Kevin Hassett argues the Federal Reserve should start cutting interest rates to avoid economic damage.
  • Hassett cites cooling inflation and a softening labor market as key reasons for a shift in policy.
  • The call adds to a growing chorus of voices urging the Fed to pivot, despite recent cautious signals from central bank officials.

Kevin Hassett, a former chairman of the Council of Economic Advisers under President Donald Trump, is urging the Federal Reserve to begin a careful process of lowering interest rates. In recent commentary, Hassett warned that maintaining the current restrictive policy stance for too long risks unnecessary harm to the economy.

His argument hinges on what he sees as clear evidence that inflationary pressures are subsiding, coupled with emerging signs of a cooling labor market. "The data are increasingly pointing to a disinflationary trend," Hassett noted, suggesting the Fed's previous aggressive hikes have done their job. He emphasized that a cautious, data-dependent approach to reductions is now warranted to prevent overtightening.

This perspective places Hassett among a number of economists and market observers who believe the central bank's next move should be an easing of policy. The debate has intensified following the latest Consumer Price Index readings, which showed a modest deceleration in price increases. However, it runs counter to the more patient messaging from several Fed officials in recent weeks, who have stated they need to see more sustained progress before considering cuts.

Market reaction to such calls has been muted but attentive. Traders, according to people familiar with the flows, are cautiously positioning for potential rate cuts in the second half of the year, though timing remains a point of fierce speculation. Hassett's comments, given his political and economic profile, are seen as adding weight to the argument for an earlier pivot.

When reached for further comment on his outlook for the pace and magnitude of potential cuts, a representative for Hassett did not immediately respond. The Fed itself maintains its next policy meeting in late July is "live," with all options on the table depending on incoming economic data.

Correction: An earlier version of this article misstated the timing of the Fed's next policy meeting. It is scheduled for late July, not June.