``` What would it mean if the "loyal Hassett" were appointed as Chairman of the Federal Reserve? ```
Deutsche Bank believes that if Hassett is appointed as Fed chairman, in the initial period, in order to build credibility and gain internal consensus, his policy path may be more hawkish or neutral than expected. Bets that the Fed will immediately pivot to large-scale monetary easing face huge uncertainties.
According to Chasewind Trading Desk, a Deutsche Bank research team report on December 3 pointed out that although Trump hopes to cut interest rates by appointing a "loyal" Hassett as Fed chairman, the actual implementation faces many obstacles.
The report states that by mid-2026, U.S. economic fundamentals may not support large rate cuts, and combined with hawkish resistance within the Fed committee, aggressive easing monetary policy will be hard to achieve.
Deutsche Bank stresses the need to be wary of the market's overly optimistic pricing for a "dovish pivot," as the ultimate policy path is likely to be much milder and more neutral than expected.
The “Loyal” Hassett
Although President Trump has not officially announced it, Hassett, the current Director of the United States National Economic Council, has become a popular candidate to succeed Powell. Deutsche Bank believes that from the Trump administration's perspective, Hassett's advantages are obvious.
First, Hassett's main label is “loyalty.”
For the past ten years, he has been a loyal economic adviser at President Trump’s side. It is well known that Trump himself is disappointed with Chairman Powell’s monetary policy decisions during his term.
Therefore, by choosing Hassett, Trump can be more confident that there will be a firm voice for low interest rates inside the Fed.
Hassett holds a Ph.D. in economics, worked in the Fed’s research department for five years, held positions at think tanks such as the American Enterprise Institute (AEI), and was Chairman of the Council of Economic Advisers (CEA) during Trump’s first term—background sufficient for the role.
Secondly, Hassett has the image of an “outsider” reformer.
Although he has experience working at the Fed, his current identity is regarded more as an external figure who can bring in fresh perspectives. This fits well with the recent call of US Treasury Secretary Bessent—for an “honest, independent and nonpartisan review” of all Fed activities including monetary policy, regulation, communication, staffing and research.
From the Trump administration's viewpoint, letting an "outsider" like Hassett lead this review is clearly more suitable than any Fed insider.
A Difficult Road to Rate Cuts: Three Major Obstacles for the New Chairman
However, appointing a chairman who favors rate cuts does not mean rate cuts can be achieved smoothly. The report highlights that if Hassett wants to implement aggressive easing, he will face at least three major challenges:
Internal consensus is hard to reach:A new chairman usually needs to prove to the market their commitment to price stability. Given the public calls from the US government to lower rates, this requirement is particularly important during the current transition period.The new chairman also needs to strive to stand at the core of the committee to facilitate consensus. This means Hassett may have to give up his most radical rate-cut proposals.
Economic fundamentals are restrictive:By mid-2026, economic fundamentals themselves may not support rate cuts. The US economy is expected to continue its steady growth; labor market downside risks are limited, while inflation will remain slightly above target.
Committee composition is hawkish:Among regional Fed presidents with voting rights in 2026, there are several hawks, including Hammack from Cleveland Fed, Logan from Dallas Fed, and Kashkari from Minneapolis Fed. The latter even cast a dissenting vote in the rate cut in October.A more disruptive possibility is that the current chairman Powell may follow the precedent of Marriner Eccles and remain as a regular board member after stepping down as chairman next May. If Powell makes this decision out of concern for Fed independence, he would become a significant obstacle to Hassett’s push for aggressive easing.
Overall, Deutsche Bank believes that given the risks faced by the US economy, almost no one in the Fed committee would agree on a clear easing stance, as this goes against the Fed's statutory dual mandate of achieving full employment and price stability. If Powell really stays on as a board member, the challenge will become even tougher.
Therefore, if Hassett wants to make a difference, a more effective way is to move toward the committee’s centrist position and build consensus around a milder policy path, such as “moving to a neutral rate at a slightly faster pace,” rather than a full dovish shift.
The report emphasizes that for the market, this means the anticipated “feast of rate cuts” is unlikely to arrive, and policy adjustments will be gradual and restrained.
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