Kevin Hassett, director of the White House National Economic Council, used a CNBC Squawk Box appearance on May 22, 2026 to give Kevin Warsh an unusually full-throated endorsement before Warsh has even taken the Fed Chair seat. Warsh wants to drag the Fed back to monetary policy and away from everything else, and the White House is fine with that.
Hassett’s framing: “I just agreed with everything that he said. The idea that the FED has lost its way a little bit, that it’s sort of lost track of its mission. It’s doing DEI stuff and climate change and all that kind of stuff… he wants to restore FED independence by returning to its roots.” The implicit comparison was to the Greenspan era, when the Fed’s job description was narrower and the chair’s signaling apparatus was tighter.
The oil shock, and why Hassett wants the Fed to look through it
The backdrop matters. WTI crude has climbed from roughly $57 per barrel on January 2 to ~$100 today, a near doubling inside five months. The PCE energy index jumped 11.56% month-over-month in March 2026 and 14.43% year-over-year. That pulled headline PCE up to 3.5% year-over-year.
However, Hassett’s response was textbook central banker hygiene. “Well, you know, I think that as an abstract principle, if inflation blips up because of a short term oil shock, then that shouldn’t affect long run policy. The FED should keep its eye on the horizon.”
The core data backs the argument, at least for now. Core PCE has drifted in a 2.75% to 3.2% year-over-year band over the past twelve months and registered 3.2% in March 2026 against 2.75% in October 2025. Hassett’s gloss: “The best forecast of top line inflation in the future is core today. And the core has barely moved just a little bit.”
Why Hassett thinks supply-side forces are doing the disinflation work
Wages, capex, AI productivity, and deregulation, in Hassett’s telling, are all pushing the other way. “You’ve got wages. We just had the biggest capital spending month ever. We’ve got AI increasing productivity. We’ve got all these things pushing prices down, having deregulation.”
He kept stacking. “The earnings announcements have been positive surprises. Quarter after quarter, we’ve had a big supply side shock because of the big, beautiful bill on the corporate side… We also have a big supply side shock on the labor side because of the no tax on tips and no tax on overtime. I don’t think that I’ve ever seen like so much supply side gas for the engine is what we’ve got right now.” If the economy is running on productivity rather than overheating demand, the Fed has room to stay patient on cuts even with a hot oil-driven headline number.
Outside forecasters partly agree and partly do not. BlackRock’s 2026 macro outlook describes Fed dovishness and AI capex as a Goldilocks setup that markets have crowded into, and the firm is short long-dated US Treasuries on the view that fiscal and balance-sheet dynamics are not as benign as Hassett suggests.
Rates say one thing, equities say another
The bond market is voting against the soothing core narrative at the long end. The 30-year Treasury touched 5.18% on May 19 and sits at 5.1% as of May 21, with a 142 basis point spread over the 3-month bill. UK gilts are at highs not seen since 1998, and Japan’s 30-year is at a record. Term premium is back globally.
Equities are doing the Hassett trade. SPDR S&P 500 ETF (NYSEARCA:SPY | SPY Price Prediction) is up 27.43% year-over-year and 8.92% year-to-date through May 21 and trades near $748, with all three major indices at fresh highs.
What investors should watch: whether core PCE stays anchored in the high-2s to low-3s while headline catches the oil pop, whether the capex print translates into measurable productivity gains in unit labor costs, and whether Warsh, once seated, actually delivers the narrower mandate Hassett is selling. If core inflation breaks above the recent range while energy stays elevated, the Greenspan-era playbook gets harder to run.
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