• Former White House economist Kevin Hassett states there is little argument against further interest rate cuts, echoing a growing consensus among analysts.
  • The Federal Reserve lowered its policy rate to a range of 3.75%-4.00% in October, its second cut of the year, amid signs of labor market deterioration.
  • Markets are now pricing in a high probability of at least one more 25-basis-point cut at the December 2025 meeting.

In a public statement that aligns with a significant shift in market sentiment, former White House economist Kevin Hassett remarked that he doesn't "see much of an argument not to cut rates." This perspective follows the Federal Reserve's recent decision to lower its benchmark interest rate by 25 basis points at its October meeting, bringing the target range to 3.75%-4.00%, the lowest level since 2022.

The Fed's move, its second reduction this year, was accompanied by a decision to conclude the reduction of its aggregate securities holdings on December 1. According to people familiar with the policy discussions, the pivot is primarily a response to accumulating evidence of labor market weakness, particularly in the August and September jobs reports. While inflation remains above the central bank's 2% target, policymakers have signaled a heightened focus on supporting employment.

Hassett's comments reflect a broader consensus that further accommodation is warranted. Market-implied probabilities now suggest a strong likelihood of at least one more rate cut before the end of the year, with forecasts pointing to additional easing through 2026. The Fed's own statement expressed a "strong commitment to maximum employment and to returning inflation to its 2% target," a delicate balancing act as economic data remains complicated by persistent reporting issues.

There was not complete unanimity behind the latest move; one member of the rate-setting committee favored a larger cut, while another dissented in favor of no change at all. Efforts to reach a Fed spokesperson for additional comment on the forward guidance were unsuccessful.

The central bank's actions are anticipated to support equity valuations and lower borrowing costs for corporations and consumers, though they present a headwind for fixed-income investors seeking yield. The path forward remains data-dependent, with analysts at firms like J.P. Morgan forecasting at least two more cuts in 2025, conditional on labor market and inflation trends.