• Kevin Hassett, White House economic adviser, says he will not replace Fed Governor Lisa Cook if she is removed, calling the allegations against her a law-enforcement matter.
  • Hassett expresses hope that Cook is innocent as she challenges President Trump's effort to remove her, a move that raises questions about Fed independence.
  • On monetary policy, Hassett signals he would either hold rates steady or cut, citing easing inflation and strong supply-side momentum.

A Stand on the Fed Governor's Fate

Kevin Hassett, the top economic adviser at the White House, made clear on Thursday that he would not step in to fill the shoes of Federal Reserve Governor Lisa Cook should she be ousted. Speaking to reporters, Hassett characterized the allegations against Cook as a matter for law enforcement, not political appointment. "I hope she's innocent," he said, adding that the process should be left to the proper authorities. Cook, who has been a vocal proponent of tighter financial regulation, is challenging President Donald Trump's attempt to remove her from the board. The move has sparked a legal battle over the president's authority to dismiss a Fed governor, a dispute that has previously reached the Supreme Court. Hassett's remarks suggest that even within the administration, there is reluctance to see Cook replaced, and that the focus should remain on the legal proceedings. "It's a law-enforcement matter," Hassett reiterated, distancing himself from the decision to remove her.

Monetary Policy on the Horizon

Turning to the economy, Hassett offered a glimpse into the administration's thinking on interest rates. With inflation showing signs of easing and the supply side of the economy demonstrating strength, he said he would either hold rates steady or cut them. "Given the recent data, I don't see a compelling case for a hike," he said. "The momentum is good, and we should be supporting that." His comments align with market expectations that the Federal Reserve may pause its tightening cycle or even reverse course later this year. However, the ongoing dispute over Cook's position could cast a shadow over the Fed's independence, which investors closely watch. Hassett's dual stance — distancing himself from Cook's removal while hinting at policy easing — could be seen as an attempt to balance the administration's desire for lower rates with the need to avoid further politicization of the Fed. As the situation develops, market participants will be keenly attuned to any further statements from the White House or the Fed itself.