Senior Fed Official Blasts Hassett's Call To Punish Central Bank Researchers

The head of the Federal Reserve Bank of Minneapolis on Thursday hit back at critical comments by a top White House official about central bank research as an attempt to undermine the Fed’s political autonomy.

Neel Kashkari, speaking at an event in North Dakota, was asked about remarks by White House economic adviser Kevin Hassett suggesting that researchers at the New York Fed should be “disciplined” for a paper finding that U.S. buyers are paying the vast majority of the costs of President Donald Trump’s tariffs.

“I think this is just another step to try to compromise the Fed’s independence,” Kashkari said.

“Over the last year, we’ve seen multiple attempts to try to compromise the Fed’s independence,” he added, pointing to subpoenas from the Justice Department to the Fed relating to renovations of its headquarters. That move prompted an unprecedented statement from Chair Jerome Powell arguing that the investigation was an attempt to pressure him to slash borrowing costs, as Trump has demanded.

“We’re not perfect,” Kashkari said of Fed officials. “We don’t get it all right. But we’re going to do our best to make the best decisions we can based on data and analysis and not let anything else distract us from that.”

The Minneapolis Fed president, who has a vote on interest rates this year, also noted that each of the central bank's 12 regional branches has its own research department and said their findings don’t always align.

“This is how we’re trying to get better and learn about the economy, by having this breadth of opinions,” he said.

White House spokesperson Kush Desai said Hassett has “consistently made clear publicly his respect for the Fed’s independence — independence that is undermined by flawed research designed for news headlines rather than peer review.”

“Director Hassett’s comments yesterday were clearly a call for the Fed to return to the practice of upholding the highest of academic standards,” Desai added. “This product fell short of that.”

Hassett on CNBC called the research “an embarrassment” and “the worst paper I’ve ever seen in the history of the Federal Reserve System.”

“The people associated with this paper should presumably be disciplined,” he added.

Hassett, the director of the National Economic Council, was previously on Trump’s short list to be the next chair of the Fed, but the president ultimately selected former Fed board member Kevin Warsh.

“Prices have gone down. Inflation is down over time,” Hassett said. “Import prices dropped a lot in the first half of the year and then leveled off, and [inflation-adjusted] wages were up $1,400 on average last year, which means that consumers were made better off by the tariffs.”

Still, other reputable sources have produced similar findings to those of the New York Fed, including Harvard Business School; Yale’s Budget Lab; the Kiel Institute for the World Economy, a German think tank; and the Congressional Budget Office.