:max_bytes(150000):strip_icc()/TAN1-83213ffc7dbe4b3084eeab638c7ad5ea.png "Fed Chair Front-Runner Says Economy Can Get Back To 1% Inflation")
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Key Takeaways
- Kevin Hassett, the frontrunner to be the next chair of the Federal Reserve, wants to bring inflation down to 1%.
- A 1% inflation rate would be the lowest since the Obama administration, other than the pandemic.
- Most forecasters do not expect inflation to get down below 2% for years.
If you could turn back the clock on inflation, a good date to pick might be July 2016.
That was the last time the Consumer Price Index rose by less than 1% over 12 months when there wasn’t a pandemic disrupting the global economy.
Kevin Hassett, director of the National Economic Council, predicts that could be the U.S. economy’s future as well. Hassett believes the economy can get back to the days of the late 20-teens, when the economy was growing fast, and inflation was nice and low, all while the Federal Reserve keeps interest rates near rock bottom.
“We got 3% growth and 1% inflation after a big supply side shock,” Hassett said Tuesday in an interview on CNBC. “And I think that’s what could happen again.”
A 1% inflation rate would be beneficial to the pocketbook: prices would double approximately every 72 years, compared to every 24 years under today’s inflation rate of around 3%.
What This Means For The Economy
Inflation of 1% combined with 3% economic growth, as Kevin Hassett says, is possible; however, it would be a remarkable combination that few forecasters expect to see anytime soon.
Getting there would be difficult. Inflation hasn’t been under the Fed’s official target rate of 2% since 2021, and most forecasters don’t expect it to return to that level for years.
Hassett believes that Trump’s economic policies will eventually lead to lower inflation. He may yet get a chance to put that theory into practice. Although Hassett is no longer the dominant frontrunner to succeed Federal Reserve Chair Jerome Powell when his term ends in May, prediction markets have him favored over the next closest contender, former Federal Reserve Governor Kevin Warsh.
