White House Signals Possible Fed Rate Reductions After Energy Shock Eases

(MENAFN) The US Federal Reserve may still have room to reduce interest rates once the current energy-driven supply shock eases, according to the director of the White House National Economic Council.

As stated by reports, Kevin Hassett said that gains in productivity from artificial intelligence and increased capital spending are helping to restrain inflation, which could relieve pressure on the Fed and create conditions for lower borrowing costs. He also looked ahead to the upcoming leadership change at the central bank.

Speaking to media outlets, Hassett said higher productivity puts “downward pressure on inflation,” which he believes should allow the Fed to lower rates once Kevin Warsh, President Donald Trump’s nominee for Fed chair, takes over next month.

Hassett made these comments despite oil prices remaining high due to ongoing war-related supply disruptions, suggesting that the inflationary impact of energy shocks will likely be temporary once market conditions normalize.

Last month, the Fed left its benchmark federal funds rate unchanged at 3.5% to 3.75%, stating it would continue to monitor incoming economic data, the outlook, and risk factors before making additional policy decisions.

Warsh, set to succeed current Fed Chair Jerome Powell, previously served as a member of the Federal Reserve Board of Governors from 2006 to 2011, including during the global financial crisis. He also represented the Fed in G20 meetings and worked on international economic matters.

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