To The Moon

Trump economic advisor Hassett called for the Federal Reserve to shrink its balance sheet to a level that is "as lean as possible" and strongly endorsed Trump's nomination of Warsh for Fed Chairman, describing it as selecting the "right person at the right time." Speaking on Fox News's Sunday Briefing program, Hassett stated that the Fed should focus on its core responsibilities—maintaining financial stability, lowering interest rates, reducing unemployment, and curbing inflation. He emphasized that the Fed should perform its duties in an "old-school, quiet" manner. The senior White House economic advisor also warned that if data changes significantly and inflation suddenly surges higher, there would be no room for interest rates to fall to low levels like 1%. Hassett revealed that Trump believes the US is currently experiencing a positive supply shock. Hassett himself was previously one of the candidates considered for Fed Chairman. He indicated that Trump will outline his housing and affordability agenda during the State of the Union address. Endorsement of Warsh Nomination Hassett expressed strong support for Trump's nomination of Warsh as Fed Chairman. He characterized Warsh as a "data-driven, independent" candidate, suggesting this individual would formulate monetary policy with an objective attitude, free from political influence. This statement is significant for calming market concerns about the Federal Reserve's independence. Warsh served as a Fed Governor from 2006 to 2011, participating in the formulation of critical policies during the financial crisis. Stance on Balance Sheet Reduction Hassett clearly stated that the Fed should compress the size of its balance sheet to a level that is "as lean as possible." This position echoes the Trump administration's expectations for the normalization of Fed policy. He stressed that the Fed should return to traditional monetary policy operations, focusing on its statutory duties with a low-key and pragmatic approach. This hints that the White House hopes the Fed will reduce the massive asset holdings legacy from the quantitative easing era. Caution on Interest Rate Outlook Hassett issued a cautious signal regarding future interest rate trends. He pointed out that if economic data undergoes substantial changes and inflation rises abruptly, there would be no capacity for rates to drop to ultra-low levels like 1%. This statement demonstrates the White House economic team's vigilance regarding inflation risks, while also tempering market expectations for significant rate cuts. Hassett mentioned that Trump believes the US is experiencing a positive supply shock, which may imply the administration expects supply-side reforms to help drive economic growth without triggering inflation.