• Former White House economist Kevin Hassett advocates for the Federal Reserve to consider interest rate reductions.
  • The call comes amid slowing economic growth and a cooling labor market, though inflation remains elevated.
  • Internal Fed dissent is growing, with two officials pushing for an immediate cut at the last meeting.

Former White House economist Kevin Hassett stated it is now “appropriate to consider” a Federal Reserve rate cut, adding a prominent voice to a growing chorus of policymakers and market participants debating the central bank's next move. This public commentary aligns with a significant shift occurring within the Fed itself, where the debate has moved from if to when easing should begin.

The push for lower borrowing costs is gaining traction as recent data points to a moderating economy. The latest jobs report showed hiring is slowing, raising concerns about the durability of the historically strong labor market. While unemployment remains low, any move above 4.4% would significantly strengthen the case for more aggressive action, according to analysts at J.P. Morgan.

This internal pressure was on full display at the July FOMC meeting. While the committee ultimately held the federal funds rate steady at a target range of 4.4%–4.5%, the decision was not unanimous. Two members, Michelle W. Bowman and Christopher J. Waller, dissented in favor of an immediate 25 basis point cut. The minutes from the meeting, released last week, noted that US economic growth had slowed in the first half of the year and highlighted overall uncertainty and downside risks, even as inflation was still described as “somewhat elevated.”

Attempts to reach Hassett for further comment were not immediately successful.

The central bank is walking a tightrope, attempting to support economic growth and the labor market without allowing inflation to reaccelerate. Some officials believe that underlying price pressures are moderating and that ongoing trade tariffs are creating only temporary effects. Market expectations, as detailed in recent research, are for the Fed to begin a series of 25 basis point cuts soon, potentially lowering the policy rate to 3.25–3.5% by early 2026.

The Fed's next steps are being closely watched by households and businesses alike, as a rate cut would lower borrowing costs for mortgages and loans but also reduce returns for savers. With similar monetary policy debates underway in the Eurozone and UK, the Fed's decision will have significant international ramifications.