Hassett Confident in Fed's Warsh, Doesn't See Market Bubble

Summary

Kevin Hassett expresses confidence in Fed Chair Kevin Warsh, highlights improving inflation data from the latest PCE report, characterizes GDP as robust behind the headline due to strong final sales, and dismisses AI bubble concerns by noting AI companies actually generate billions in revenue unlike dot-com era firms.

• Hassett reaffirms full confidence in Fed Chair Warsh despite three dissents and high long-term yields.
• He says the latest PCE data showed negative headline inflation and a sharp drop in core, easing price pressures.
• GDP final sales rose at nearly 4%, offset by inventory and import adjustments; consumption and investment were strong.
• He rejects the idea of a market bubble, arguing AI firms produce real revenue and productivity gains unlike unprofitable dot-com companies.
• He expects the Fed under Warsh to develop a new, supply-side-based reaction function.
• He cites administration policies on drug prices, deregulation, and avian flu management as helping lower overall inflation.
• Energy prices blipped higher but futures markets expect a retreat, he notes.