Hassett Predicts US-Iran Talks to Calm Oil Prices and Create Room for Rate Cuts

The White House's Chief Economic Advisor, Kevin Hassett, stated that following an agreement with Iran, the White House anticipates a significant decrease in energy prices, which would provide room for the Federal Reserve to lower interest rates. President Trump confirmed on social media that negotiations with Tehran are progressing in an orderly and constructive manner. The White House considers the trend in energy prices to be the core variable determining subsequent monetary policy space.

At present, Iran's closure of the Strait of Hormuz is causing a spike in domestic fuel prices in the United States, posing a political risk for Trump and his Republican Party ahead of the November midterm elections. The latest data shows that the U.S. consumer price index rose by 3.8% year-on-year in April, marking the fastest increase in nearly three years, with the core inflation rate also climbing to 2.8%. However, Kevin Hassett pointed out that the accelerating inflation is primarily driven by energy prices, with little change in the core data, and once oil prices retreat, the U.S. may even face deflation.

Regarding the independence of monetary policy, Kevin Hassett emphasized respect for the Federal Reserve's independence and praised the new Federal Reserve Chairman, Kevin Warsh, who was sworn in last Friday. Trump previously publicly called for him to remain completely independent. Although the bond market still has bets on the Federal Reserve raising rates in 2026, the White House's stance indicates an expectation to stabilize oil prices through diplomatic means, thereby encouraging the Federal Reserve to shift towards interest rate cuts.