(Bloomberg) — Kevin Hassett, President Donald Trump’s chief economic adviser at the White House, signaled he’s confident that an eventual drop in oil prices will create space for the Federal Reserve to lower interest rates.
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The White House expects energy prices to drop once there’s a deal with Iran, Hassett said on Fox News’ Sunday Morning Futures, just as Trump posted on social media that negotiations with Tehran “are proceeding in an orderly and constructive manner.”
“Again, we expect energy prices, as soon as there’s a deal, to plummet,” Hassett said. “And when that happens, then there will be a lot of room for the Fed to do the right thing at lower rates.”
He emphasized that he respects the Fed’s independence and praised Kevin Warsh, who was sworn in as Fed chair on Friday with Trump saying he wants him to be “totally independent” and “do your own thing.”
While a surge in US fuel prices caused by Iran’s closing of the Strait of Hormuz is a growing political risk for Trump and his Republicans for midterm elections in November, Hassett argued that accelerating inflation is largely driven by energy prices.
“If you look at the last few data reports, the energy prices were absolutely concerning but the core was barely moving at all,” he said. “And I think that as soon as we see energy prices going back down you could actually be looking at negative inflation because of the energy price going down.”
The US consumer price index rose 3.8% in April, the fastest pace in almost three years. The core CPI, which excludes food and energy, was up 2.8%, the most since September.
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