No reason U.S. debt should be downgraded, says NEC's Kevin Hassett

Summary

Kevin Hassett, NEC Director, discusses Fed policy under Chair Kevin Warsh, the U.S. fiscal outlook and debt downgrade risk, and the latest CPI data. He expresses confidence in the Fed, argues against a debt downgrade citing job cuts, and notes futures markets expect a sharp oil price decline while highlighting core disinflation from Trump policies.

• Hassett says the White House has high regard for Fed Chair Kevin Warsh and expects data-driven policy.
• He argues there is no reason for a U.S. debt downgrade because government employment reductions of ~300k improve the long-run budget outlook.
• On inflation, he points to futures markets signaling a sharp drop in oil prices over the next few months.
• He highlights that the core CPI showed drug prices falling and overall disinflation, attributing it to Trump policies.
• He indicates the economic team’s policies are having a big positive effect on reducing inflation outside of energy.