Hassett says Fed has scope to cut more than 25 bps as markets price a deeper easing path
The White House’s Kevin Hassett, nominated to lead the Federal Reserve, signaled the central bank has room to cut rates by more than a standard quarter-point move—comments that tilt the policy conversation dovish and could weigh on the dollar while supporting risk assets.
Market snapshot
- Kevin Hassett says there is “plenty of room” for the Fed to cut rates—and potentially by more than 25 basis points.
- He emphasized a data-dependent approach, noting a slight cooling in labor growth.
- Betting markets still favor Hassett for Fed Chair at 76% on Polymarket, down from 88% a day earlier; Kevin Warsh sits near 12%.
- Hassett said the final decision rests with the President and could change, while adding he would act on his own judgment if appointed.
- Treasury Secretary Bessent has been floated as a contender but is not seeking the role, according to Hassett.
What Hassett said
Hassett, currently serving as a White House economic adviser, argued the Federal Reserve has “plenty of room” to ease policy and left the door open to a reduction larger than 25 basis points. He framed the approach as firmly data-dependent, acknowledging that US labor-market momentum has cooled modestly, and stressed that a Fed Chair should respond to incoming evidence rather than adhere to preset moves.
FX and rates take
Talk of an easing path wider than a single quarter-point cut tends to:
- Pressure front-end Treasury yields and support curve steepening if growth risks rise.
- Weigh on the US dollar against rate-sensitive peers, particularly if markets move to price a faster or deeper cutting cycle.
- Bolster risk appetite in equities and credit as financial conditions loosen—though that can be tempered if investors read the signal as growth anxiety rather than a benign disinflation story.
For FX traders, the balance between disinflation progress and growth resilience remains pivotal: a quicker pivot typically softens the dollar, while any re-acceleration in inflation would complicate that narrative and revive USD support via higher real yields.
Policy debate: data dependence vs. being forward-looking
Hassett’s stance aligns with the current Fed framework under Chair Jerome Powell, who has repeatedly emphasized data dependence. That puts him at odds with critics including Miran and Bessent, who argue the central bank should be more forward-looking—anticipating turns in activity and inflation rather than reacting to them. The split matters for markets: a more anticipatory Fed could cut sooner and larger in the face of softening indicators, while a reactive Fed moves later but with clearer confirmation, affecting volatility, term premia, and cross-asset correlations.
Succession odds and political overlay
Despite a pullback from earlier levels, prediction markets still give Hassett a commanding lead to become the next Fed chief. On Polymarket, his implied probability stands near 76%, down from about 88% yesterday, with Kevin Warsh around 12%. Hassett noted the President will ultimately decide and “could change his mind,” while adding he would base policy decisions on judgment informed by data if appointed. Bessent, currently at Treasury, has been mentioned in market chatter but is described as not seeking the job.
What to watch next
– Upcoming inflation prints, claims data, and payrolls for confirmation that labor cooling is broadening beyond hiring to wages and hours.
– Fed communications for any shift in guidance on the size and pace of cuts.
– Market pricing in swaps and futures for signs traders lean toward a 50 bps opening move versus a sequenced 25 bps path.
– Dollar crosses most sensitive to rate differentials and growth signals, including USD/JPY, EUR/USD, and high-beta FX.
FAQ
What exactly did Kevin Hassett signal on rates?
He said the Fed has room to ease policy and explicitly left open the option of cutting by more than 25 basis points, while underscoring a data-dependent approach.
How could this affect the US dollar and Treasuries?
Hints of a larger or faster cutting cycle typically push front-end yields lower and can weaken the dollar, especially against currencies where central banks are less dovish or growth is more resilient.
Is Hassett the favorite to be the next Fed Chair?
Yes, betting markets still favor him. Polymarket shows about a 76% probability for Hassett, though that’s down from roughly 88% a day earlier; Kevin Warsh is around 12%.
What’s the current policy debate inside markets?
Whether the Fed should stay strictly data-dependent or become more forward-looking—moving earlier to pre-empt a slowdown. The answer influences timing, magnitude, and market volatility around rate cuts.
What should traders monitor now?
Key US data on inflation and labor, Fed commentary, and rate futures positioning for clues on whether markets migrate toward pricing a 50 bps initial move or a gradual 25 bps path.
This article was prepared by BPayNews for market participants seeking timely macro and FX insight.
