Hasset: Once the US and Iran reach an agreement, oil prices will plummet, creating room for the Federal Reserve to cut interest rates

Golden Finance reports that on May 25, Kevin Hassett, U.S. President Trump’s chief economic adviser, said that he believes the eventual fall in oil prices will create room for the Federal Reserve to cut interest rates. “We again expect that once an agreement is reached, energy prices will crash,” Hassett said. “When that happens, the Federal Reserve will have enough room to take the right action and lower interest rates.” He stressed that he respects the Federal Reserve’s independence and praised Kevin Worsh, who was sworn in as Fed Chair last Friday.

Although the surge in U.S. fuel prices caused by Iran’s closure of the Strait of Hormuz poses an increasing political risk for Trump and his fellow Republicans ahead of the November midterm elections, Hassett believes that the accelerated inflation is mainly driven by energy prices. “If you look at the recent data reports, energy prices are absolutely worrying, but core prices have hardly moved,” he said. “I think once we see energy prices fall back, due to the decline in energy prices, you may actually see negative inflation.” (Jin10)