The Fed Chair Race Heats Up: "Trump's Close Friend" Hassett's Declaration of Independence and Rate Cut Blueprint

Kevin Hassett, the director of the White House National Economic Council and one of the final candidates for the Fed chair position, has recently been vocal on various fronts. On one hand, he defends the independence of the Fed, emphasizing that interest rate decisions should be based on consensus and data; on the other hand, he clearly states that there is “ample room” for unconventional rate cuts. Hassett is regarded as a close friend of President Trump, and his candidacy is under significant pressure regarding its independent nature due to this relationship. He suggests that the productivity leap brought on by artificial intelligence provides a historic window for the Fed to implement a looser monetary policy, and his policy approach is interpreted by the market as leaning towards a “Greenspan-style” adaptive management. This personnel competition not only concerns the monetary policy path of the United States for the next few years, but the outcome of this struggle for independence will also profoundly affect global risk assets, including the liquidity expectations of Bitcoin and Crypto Assets markets.

Candidate Hassett's Debut and Core Controversies

As the term of the current Fed Chairman Jerome Powell approaches its end, the race for the next leader has entered its final stage. Kevin Hassett, the Director of the White House National Economic Council, as one of the final five candidates, has recently outlined his policy ideas through a series of activities, including an interview with CNBC and attendance at the Wall Street Journal CEO Council Summit. This series of actions is seen as a clear signal of seeking support on the eve of key decision-making.

Hacett's core policy proposals revolve closely around two seemingly conflicting themes: a firm commitment to maintaining the tradition of the Fed's independence, and advocating for a “significant” rate cut based on data support. In an interview with CNBC, he repeatedly emphasized, “The independence of the Fed is really, really important,” and pointed out that the driving force behind interest rate changes must be based on “the consensus of facts and data.” However, it is precisely his close relationship with Trump that casts a shadow over his commitment to independence. Sources revealed that Trump's advisers are concerned that if Hacett takes office, he may be perceived as being too obedient to the president's directives, rather than strictly adhering to the Fed's dual mandate of stabilizing prices and achieving full employment.

In response, Hasit made a direct reply. He believes that it is untenable to determine someone’s qualifications solely because they are a close friend of the president and have collaborated well. He also stated that the president himself would oppose this view. He emphasized that his loyalty would be based on independent economic judgment, and he believes that President Trump trusts this judgment. This statement aims to sever the inevitable connection between “relationships” and “professionalism”, attempting to draw public attention to his economic philosophy rather than political ties.

The Century-Old Tradition of Fed Independence and Contemporary Challenges

The independence of the Fed is the cornerstone of its monetary policy credibility and a model for global central bank governance after World War II. This tradition implies that the formulation of monetary policy should be free from short-term political pressures, with technical bureaucrats making independent decisions based on medium- to long-term economic data. Harker's defense of this tradition in public undoubtedly responds to the sharpest external criticisms. However, the challenges of history always recur, and Trump's continuous criticism of Powell and demands for significant interest rate cuts during his tenure represent a contemporary stress test for this independence.

Trump has publicly advocated that the Fed should consult the President's opinion when making interest rate decisions, which directly conflicts with the principle of the central bank's independence. In responding to this issue, Hasset demonstrated a subtle art of balance. On one hand, he insisted on a consensus and data-driven decision-making process, while on the other hand, he acknowledged that “the President is an experienced economic observer, and if he raises good points, I believe others will recognize that too.” This statement neither completely denies the value of political figures' opinions nor does it exclude them from the framework of “professional consensus,” attempting to find a balance between principle and flexibility.

It is worth noting that the current Fed governor, Stephen Milan, appointed by Trump, has opposed in all three rate cut votes since taking office in September, advocating for a more aggressive 50 basis point cut. This itself indicates that even presidential appointees do not necessarily align with the president's stance in voting. This may provide a realistic footnote to Hasit's argument that “relationships do not equal obedience.” However, the roles and influence of governors and the chair are fundamentally different; the chair has much greater power in setting the agenda and guiding public opinion, and thus the market's standards for the independence of the chair candidate are also more stringent.

The Extraordinary Space for Rate Cuts and the “Paradigm Shift” Brought by Artificial Intelligence

Apart from the controversy over independence, the most striking part of Hasset's policy blueprint is his radical view on the space for interest rate cuts. When asked whether he would advocate for a larger cut of more than 25 basis points, he unequivocally answered “correct” and stated that there is currently “ample space” to do so. This statement sharply contrasts with the current Fed's cautious tone of “higher for longer,” suggesting that if he were to lead the Fed, monetary policy could quickly shift towards a more accommodative path.

The core reason supporting this radical view is the revolution in artificial intelligence technology. Hasett compares the current moment to the period in the 1990s led by former Chairman Alan Greenspan. At that time, Greenspan did not rush to raise interest rates despite low unemployment, which created a favorable monetary environment for the long-term prosperity of the U.S. economy, as he faced productivity gains brought by the internet and computers. Hasett believes that artificial intelligence is a “bigger story than computers” in terms of productivity, providing the Fed with a historic opportunity to replicate the “Greenspan-style” policy path: tolerating lower interest rate levels under the expectation of rapid productivity growth, to stimulate simultaneous growth in total supply and total demand.

Key Highlights of Hassett's Rate Cut “Blueprint”

Core Policy Concept: Utilize AI productivity dividends to implement adaptive loose monetary policy.

Interest Rate Cut Space Assessment: Clearly stated that there is “sufficient” room for a reduction of more than 25 basis points.

Economic Growth Potential: The potential GDP growth rate is expected to be well above 3%, possibly exceeding 4%.

Historical Reference Frame: Benchmarking the policy framework of Greenspan's response to the technology revolution in the 1990s.

Core Decision Basis: Adhere to data-driven approaches, but emphasize the “forward-looking” judgment on AI driving supply growth.

Hasset further elaborated that the anticipated growth in productivity and a surge in capital investment could push the potential growth rate of the U.S. economy to levels far exceeding 3% and even 4%. In such a scenario, lowering the Intrerest Rate can not only increase total demand by stimulating investment and consumption but, more importantly, it can enhance the overall supply capacity of the economy by encouraging capital deepening. This view that monetary policy can optimize both the supply and demand sides represents a more proactive role for the central bank.

The Market Implications of Crypto Assets and Global Risk Assets

The personnel changes and policy shifts in the Fed leadership have always been a top priority for global capital markets. For Bitcoin and the entire Crypto Assets market, as a high beta risk asset class, it is exceptionally sensitive to the tidal changes in global Liquidity. The roadmap depicted by Hasit of “greater rate cuts” and “maintaining easing through productivity dividends”, if realized, could mean that the dollar Liquidity environment is more abundant than the current market expectations.

In the short term, the candidate's remarks about the “over 25 basis points of rate cut space” may be interpreted by the market as a dovish signal, boosting risk appetite. The optimism in traditional financial markets often spills over into the crypto market, especially during phases where macro narratives dominate the trend. In the medium term, if AI-driven productivity growth is indeed as strong as has been anticipated by Hasset, it will create a “high growth, low inflation” golden combination, which is extremely favorable for technology growth assets. Crypto Assets, particularly projects like Ethereum that are closely related to decentralized computing and application innovation, may be revalued within a broader narrative of “AI and the technology revolution.”

However, the uncertainty is equally immense. The primary concern is the questioning of independence. If the market ultimately determines that the decisions of the new chair will be excessively influenced by political considerations, the credibility of the Fed's monetary policy framework will be undermined, possibly leading to an increase in long-term inflation expectations and a deterioration of the dollar's credit. In this scenario, Bitcoin, as a non-sovereign, censorship-resistant “digital gold” narrative, may regain strong momentum and become a tool for hedging against fiat credit risk. Conversely, if independence is firmly maintained, then market focus will completely return to economic fundamentals and the interest rate path itself.

The “Productivity Narrative” of Artificial Intelligence and the Crypto Market

Hassett has elevated artificial intelligence to the level of determining monetary policy, and this “productivity narrative” is also fermenting within the Crypto Assets space. While the traditional financial sector focuses on the enhancement of overall economic efficiency by AI, in the crypto ecosystem, the integration of AI and blockchain is seen as the core of the next paradigm revolution. From decentralized computing networks, data markets for AI model training and inference, to AI-driven automated DeFi strategies and smart contract auditing, a series of projects are exploring the fusion of the two.

This integration essentially also creates new “digital productivity.” For example, ensuring the transparency and trustworthiness of AI training data through blockchain, or utilizing encryption economic models to incentivize the formation of a distributed computing power market, can enhance the operational efficiency of the economic system from different dimensions. If the views of Hasset and others hold, that AI will systematically enhance productivity and suppress inflation, then the long-term value foundation of crypto projects that provide infrastructure and support services for AI will be more solid. This means that while investors in the crypto market pay attention to macro interest rate policies, they also need to deeply examine which projects truly have the capability to capture the value growth brought by AI.

Crypto Assets Investors' “Fed Watch” List

For participants in the crypto assets market, there is no need to get caught up in the details of Washington's political games, but it is essential to grasp the main line of its policy output. Regarding the upcoming transition of the Fed chairman, a concise observation checklist can be established:

Independence Indicator: Focus on the nominee's statements at the hearing regarding presidential intervention in monetary policy, as well as their decision-making when facing political pressure for the first time after taking office.

Policy Framework Bias: Observe whether it formally incorporates “productivity changes” into the monetary policy reaction function and whether it has a higher tolerance for inflation.

Interest Rate Path Language: Listen to their judgment on the level of “neutral interest rate” and the specific quantitative description of “sufficient room for interest rate cuts.”

Understanding Emerging Technologies: Apart from AI, whether there is a basic understanding of innovations such as blockchain and digital currency will influence the Fed's stance on relevant regulation and innovation.

Any clear signals in this list could serve as important references for adjusting positions and allocation strategies in Crypto Assets. In the macro narrative cycle, understanding the direction of the tide is far more important than struggling in the waves.