Hassett says June CPI leaves no case for Fed rate increases

National Economic Council Director Kevin Hassett said Wednesday that the latest US inflation figures leave little case for higher interest rates, after the consumer price index fell 0.4% in June and annual inflation eased to 3.5%, according to the Bureau of Labor Statistics. His comments on CNBC add to White House pressure on the Federal Reserve to move toward cheaper credit if incoming data continue to soften.

Hassett told CNBC’s “Squawk Box” that “there’s not really an excuse for raising rates right now.” He said he expected the central bank to be considering rate reductions rather than increases if the recent pattern in economic figures persists.

The June CPI report, released Tuesday by the Bureau of Labor Statistics, came in below expectations from economists surveyed by Dow Jones, according to CNBC. The monthly decline was the largest drop in consumer prices in more than six years.

For financial markets and borrowers, the rate debate turns on how the Fed interprets inflation data against its policy goals. The central bank’s committee sets short-term interest rates, which influence the cost of mortgages, business loans and other credit across the economy. Lower rates can reduce borrowing costs and support activity, while higher rates are generally used to restrain demand and bring inflation under control.

Hassett’s remarks align with President Donald Trump’s repeated calls for the Fed to cut rates quickly, CNBC reported. Trump has argued that lower rates would support the economy and make borrowing less expensive.

Hassett also said the White House expects Fed Chair Kevin Warsh, whom Trump chose to replace Jerome Powell and who began the role in late May, to steer the committee toward what Hassett called “the right answer.”

The NEC director described the June inflation reading as “one of the best inflation reports that I’ve seen in my entire career.” He credited Trump administration policies for the improvement and said the fall in prices was not limited to cheaper oil linked to developments in the US war against Iran.

Hassett pointed in particular to insurance costs. He said that after reviewing the data with his staff, he concluded that Trump’s emphasis on law and order in major cities had contributed to lower insurance costs because of reduced car theft.

Warsh struck a more cautious tone in testimony Tuesday before the House Financial Services Committee. The Fed chair said some observers might read the CPI data as evidence that the inflation problem had been solved, but added: “That is not my view.”

The split in tone underscores the policy tension around the latest data. Hassett presented the CPI report as evidence that rate increases are unwarranted and cuts may be appropriate if trends continue. Warsh, while acknowledging the data in congressional testimony, did not frame the report as an endpoint in the inflation fight.

This story draws on original reporting from CNBC.