During a recent appearance on CNBC’s Squawk on the Street, Kevin Hassett, Director of the National Economic Council (NEC), declared that U.S. inflation is on a favourable trajectory. He specifically noted that the latest consumer-price index (CPI) data came in below expectations, marking what he called a “very positive” development for the economy.
What Hassett’s Comments Reveal
Hassett’s remarks reflect a growing optimism at the White House about inflation dynamics. He emphasised that lower-than-forecast CPI figures suggest the inflation-fighting strategy of the Federal Reserve may be gaining traction and that pressure on prices is easing more than commonly assumed.
While he did not project specific rate-cut timings, the tone suggests that policymakers may increasingly view inflation outcomes as supportive of future monetary-policy easing.
Why the Latest CPI Figures Matter
According to Hassett, the recent inflation data were key in reshaping expectations. Because inflation remains a prime driver of interest-rate policy, incoming data below forecast levels can:
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Reduce the urgency for further aggressive rate hikes or extending high-rate regimes.
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Boost investor and consumer confidence by signalling cooling cost pressures.
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Influence forecasts for economic growth, as more stable inflation often correlates with stronger real income and consumption.
Hassett did note, however, that while the trend is positive, “approaching” the Fed’s long-run target will still take time.
Broader Economic Context
The U.S. economy is showing a mixed set of signals: while inflation has cooled in certain sectors, wage growth remains robust, and labour-market conditions still appear tight. Despite those headwinds, lower CPI prints provide some latitude to policymakers and market participants to recalibrate expectations around economic-policy risk.
Hassett’s comments arrive at a time when markets are sensitive to any data suggesting that inflation-peak risks may be receding. If sustained, this could open the door for discussions of a potential rate cut by the Fed in 2026 although no commitment has been made.
Implications for Investors and Policymakers
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For investors: The improved inflation outlook may support longer-term growth assets, as moderating inflation tends to reduce discount-rate pressure and boost equity valuations. Bond markets might also adjust, anticipating a slower pace of rate increase or earlier rate cuts.
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For policymakers: Hassett’s tone may signal the administration’s preference for balance acknowledging inflation risk while seeking to avoid undermining growth. However, the Fed remains independent, and additional data will be pivotal.
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For consumers and business: Easing inflation pressure could translate into slower price increases, which might improve purchasing power and support consumer spending. For businesses, it may reduce cost-pass-through pressures.
Key Caveats to Note
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A single below-forecast CPI print is encouraging, but not definitive. Core inflation, wage trends, service-sector pricing and supply-chain cost pressures remain areas of concern.
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Markets should not assume automatic rate cuts: the Fed will likely demand evidence of sustained inflation moderation and stable employment.
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External risks such as geopolitical events, energy-price shocks or supply disruptions could still derail the benign inflation narrative.
FAQs
Q1. What did Kevin Hassett exactly say about inflation?
A1. He said inflation is “trending very positively” and that the latest CPI data came in below expectations, which he viewed as a favourable sign for the economy.
Q2. Why does a below-forecast CPI matter for monetary policy?
A2. A lower-than-expected CPI suggests inflation pressures may be easing, which can reduce the urgency for higher interest rates or extended periods of restrictive policy from the Fed.
Q3. Does this mean the Fed will cut rates soon?
A3. Not necessarily. While the outlook may improve, the Fed still needs sustained evidence of inflation control plus stable employment. Hassett did not commit to specific timing for rate cuts.
Q4. Are there still risks that inflation could rebound?
A4. Yes. Wage growth, service-sector pricing, global supply-chain shocks or energy-price spikes could still force inflation higher. A single positive CPI print is a good sign, but not sufficient on its own.
Q5. How should investors interpret Hassett’s comments?
A5. The remarks signal improving inflation outlook, which can be positive for asset markets. However, investors should not base decisions solely on one comment. It remains wise to consider broader economic data, risk factors and personal investment objectives.
