Hassett warns central banks against new rate hikes, frames it as a policy mistake for the Fed and ECB

White House pressure enters the rate debate

White House National Economic Council chair Kevin Hassett warned that it would be a “policy mistake” for both the European Central Bank and the Federal Reserve to raise interest rates further. Hassett delivered the remarks during a White House press briefing, adding political weight to a monetary policy debate that normally claims apolitical independence, according to the CoinDesk source.

Hassett argued that additional hikes could stall economic growth. He pointed to lagging indicators and warned central banks could risk overtightening. The source frames this timing as sensitive because the Fed is scheduled to meet next week and markets, at the time of writing, were pricing in a 60% chance of a rate hold.

Why Hassett thinks hikes could backfire

The source ties Hassett’s case to the idea of long and variable monetary policy lags. It says monetary policy can take 12 to 18 months to fully impact the economy. With the 2022 to 2023 tightening still working through the system, the source says raising rates now could overshoot and unnecessarily push the economy toward recession.

The source also recalls historical examples used to illustrate what “policy mistake” means in economic discussions. It cites the Fed’s tightening in 1937 as a move that deepened the Great Depression, and the ECB’s 2011 rate hike as an action that worsened the Eurozone debt crisis.

Mixed macro signals on inflation and growth

The source says inflation has cooled but not cleared. In the US, it reports February CPI at 2.8% year over year, down from a June 2022 peak of 9.1%, while still above the Fed’s 2% target. For the Eurozone, it lists inflation at 2.6% and core inflation at 3.1%.

Growth and employment signals cut in different directions. The source reports US GDP growth at 2.5% annualized in Q4 2024, above trend but slowing. For the Eurozone, it reports only 0.1% growth in Q4 2024, and Germany contracting. It also cites labor data, including US job growth of 275,000 in February and unemployment rising to 4.1%, alongside Eurozone unemployment at 6.2%.

Independence pushback and what it means for central banks

Hassett’s comments, per the source, raise questions about central bank independence because the Fed and ECB are designed to be apolitical. The source also notes the White House has a stake in economic performance ahead of the 2026 midterm elections.

Former Fed Vice Chair Richard Clarida is quoted in the source with a reminder that political commentary on monetary policy is common, but the Fed must ignore it and focus on its dual mandate of maximum employment and stable prices. The ECB has a single mandate focused on price stability, the source adds.

The source also describes divergence in policy paths. It says the Fed has held rates steady since September 2024, while the ECB cut rates by 25 basis points in March 2025. It includes a brief table of current rates and last moves, but the excerpt ends before the ECB meeting schedule line fully appears.