Why is the market not worried about the crisis of the Federal Reserve's independence following Hassett's appointment? Looking at Polymarket, Hassett's nomination probability for the next Federal Reserve Chair has already reached 83%. After researching Hassett's resume, he has a traditional academic background: a PhD in Economics from Wharton School, served as an Associate Professor of Economics and Finance at Columbia University in the 1980s, was a senior economist at the Federal Reserve in the 1990s, and then served as the Director of Research at the American Enterprise Institute focusing on tax and economic growth research until he began supporting Trump's economic agenda in 2016, and in 2017 he became the Chair of the White House Council of Economic Advisers during Trump's first term.
Recently, Hassett's election probability has further risen to over 80%, with various news headlines revealing this, but the interest rate market's reaction remains lukewarm. It seems that the market is not worried about Hassett's assumption of office threatening the Federal Reserve's independence. There may be two reasons for this:
1) A traditional academic background, not a wild scholar, and he has previously been a senior economist at the Federal Reserve. Looking solely at his resume, he may be more suitable than Powell.
2) Although he is relatively aggressive, he has not reached the point of being extreme. Recently, he has also expressed attitudes like “progressing slowly and steadily towards goals, observing data, this is cautious policy.”
Additionally, Trump's nominated board member, Milan, is very aggressive in pushing for significant rate cuts, but at the end of September, he himself mentioned that the neutral interest rate is at 2.5%, which is just a bit lower than the previous dot plot's expectation of 3%, so his stance is not unreasonable. The market believes that if he takes office, he may adopt a compromise stance.
Of course, it can also be said that since it has not been officially announced, it is not yet time for the market to react.
1) Central banks around the world find it difficult to be completely independent;
2) The market is very practical; in the short term, there is a brief concern about independence, but afterward, it still looks at the easing trend and economic conditions.
3) The so-called Federal Reserve independence is also a narrative in financial markets over the past three to four decades; in the future, the market may accept new narratives, such as the need for close coordination between fiscal and monetary policies, etc. $BTC
