"Puppet for rate cuts," amid talk of Hassett as Fed chair… bond investors' warning

"No inflation measures, market collapse"

Concerns have been raised on Wall Street regarding Kevin Hassett, chairman of the White House National Economic Council (NEC), who has emerged as a leading candidate for the next chair of the U.S. central bank (Fed). The worry is that, having served as chairman of the White House Council of Economic Advisers during Donald Trump's first term, he may carry out unconditional rate cuts at President Trump's behest.

The Financial Times (FT) reported on the 3rd (local time) that the U.S. Treasury contacted senior executives from major Wall Street banks, large asset managers, and key investors in the bond market one-on-one last month to get opinions on Fed chair candidates. It was reported that this consultation took place before Treasury Secretary Scott Bessent conducted a second round of interviews with the candidates.

FT reported that, in this process, bond investors expressed concern that Hassett might advocate indiscriminate rate cuts even if inflation continues to exceed the Fed's 2% target. President Trump has repeatedly demanded rate cuts and criticized Fed Chair Jerome Powell. One market participant said, "No one wants a 'Truss episode.'" They cited the 2022 U.K. bond market shock triggered by the large tax-cut plan of Prime Minister Liz Truss's cabinet. Some also warned that dovish monetary policy combined with high inflation could trigger long-term government bond sell-offs. FT explained, "Market participants' doubts about Hassett reflect the broader unease on Wall Street about a change in the Fed chair."

John Stopford, head of income strategy at asset manager Ninety One, assessed, "The market views him as 'Trump's puppet,' and that undermines the Fed's credibility."

Reporter Han Gyeong-je hankyung@hankyung.com