Wall Street and corporate insiders have staged a last-ditch effort to warn President Trump about the risks of choosing National Economic Council Director Kevin Hassett as his nominee to replace Fed Chair Jerome Powell, according to Fox Business Senior Correspondent Charles Gasparino. The warnings focus on Hassett’s lack of independence and credibility at the central bank, which could lead to higher long-term interest rates.
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Long-term yields, like the 10-year Treasury yield, could still rise with a lower federal funds rate because the yield is tied to perceptions of inflation and economic growth. That could be problematic for consumers, as mortgages, loan rates, and many other borrowing costs are tied to the 10-year yield.
“If Hassett manages to cut short term rates ( as Trump wants) with divided vote because of sticky inflationary pressures, it will be perceived as political and inflationary,” said Gasparino.
Bond Investors Sound the Alarm on Hassett as Fed Chair
Bond investors are also worried about Trump choosing Hassett, according to the Financial Times. Wall Street bank and asset management executives voiced their concern to the Treasury after the department gathered feedback on Fed Chair candidates last November.
The investors fear that Hassett is too closely linked with Trump and will cut rates too aggressively while inflation risks persist.
Betting markets largely favor Hassett as Trump’s Fed Chair choice, with Polymarket pricing in 81% odds.
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