Hassett and Walsh's economic backgrounds and policy positions map out two possible paths for the Federal Reserve's future. Hassett, as the designer of Trump's tax reform, holds a distinctly dovish stance, advocating for "ample room for significant rate cuts," even suggesting a one-time cut of 50 basis points, which aligns closely with Trump's expectation of "interest rates dropping to 1%." In contrast, Walsh represents the traditional hawkish view, emphasizing that inflation is a result of policy choices and criticizing the Federal Reserve's long-term low-interest rates for exacerbating fiscal deficits, advocating for disciplined policies to prevent asset bubbles. If Hassett takes office, he may stimulate short-term growth through faster rate cuts, benefiting tech stocks and cryptocurrencies, but potentially sacrificing inflation control; Walsh, on the other hand, tends to favor cautious rate cuts, prioritizing long-term financial stability, which may lead to slower economic growth but reduce stagflation risks. The differences between the two are also reflected in their judgments on neutral interest rates: Hassett believes current rates are well above neutral levels with substantial room for cuts; Walsh is closer to the Federal Reserve's official predictions, emphasizing data dependency. The outcome of this ideological competition will determine whether U.S. monetary policy after 2026 leans towards politically driven radical easing or returns to conservative caution.
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