Hassett says latest inflation data leaves no case for Fed rate hikes

National Economic Council Director Kevin Hassett said Wednesday that the latest U.S. inflation data gives the Federal Reserve little reason to raise interest rates, a stance that matters for investors because Fed policy feeds directly into borrowing costs, stock valuations and bond yields.

Speaking on CNBC’s “Squawk Box,” Hassett said there is “not really an excuse for raising rates right now.” He added that, if the data keep moving in the same direction, he expects the central bank to consider cutting rates instead.

The Federal Reserve sets a benchmark interest rate that influences what banks charge each other for short-term loans. That rate then ripples through the economy, affecting credit cards, mortgages, business loans and the discount rate investors use to value future corporate earnings.

Hassett said the White House expects Fed Chair Kevin Warsh, President Donald Trump’s choice to replace Jerome Powell, to push the rate-setting committee toward what Hassett called the “right answer.” Warsh started the job in late May, according to CNBC.

Hassett’s comments align with Trump’s repeated calls for the Fed to cut rates quickly to support the economy and make borrowing cheaper, CNBC reported.

Inflation report shifts the rate debate

Hassett’s remarks came after the Bureau of Labor Statistics released the latest consumer price index, or CPI, a measure of what households pay for a broad basket of goods and services.

The CPI fell 0.4% in June on a seasonally adjusted basis, according to the BLS report cited by CNBC. That brought the annual inflation rate to 3.5%. The report also came in below expectations from economists surveyed by Dow Jones, and CNBC said it marked the largest drop in consumer prices in more than six years.

Hassett called the CPI release “one of the best inflation reports that I’ve seen in my entire career” during the CNBC interview.

He credited Trump’s policies for the improvement. Hassett said the decline was not limited to lower oil prices tied to developments in the U.S. war against Iran. He also argued that insurance costs had fallen because Trump had emphasized law and order in major cities, saying lower car theft risk made auto insurance cheaper.

Warsh sounds more cautious

Warsh did not treat the inflation report as a final win. In testimony Tuesday before the House Financial Services Committee, the Fed chair said some people might read the data as proof that the inflation fight was over, but added, “That is not my view,” according to CNBC.

That difference in tone matters because the Fed does not move rates based on one data point alone. Policymakers typically weigh inflation, jobs, growth and financial conditions before deciding whether to raise, hold or cut rates.

For everyday investors, the debate is about the path of money costs. Lower rates can reduce pressure on borrowers and can support risk assets, while higher rates can make cash and bonds more attractive relative to stocks. The next Fed decision will show how much weight officials put on the June inflation slowdown.

This story draws on original reporting from CNBC.