Kevin Hassett, former director of the White House’s National Economic Council, is reportedly the leading candidate to become the next chairman of the US Federal Reserve. Jerome Powell’s term expires in May, and President Donald Trump is expected to announce his nominee within the next month. Hassett’s potential nomination is seen as a significant test of market and Republican sentiment, according to BCA Research.
BCA Research suggests that even with political alignment, the nomination may not immediately trigger substantial market movement. Factors such as slowing economic growth, weakening employment figures, and contained inflation already point towards a more relaxed monetary policy. The real challenge for a dovish appointee, someone who favours lower interest rates, would arise if inflation pressures were to resurface.
The report highlights the importance of credibility and stable expectations in managing large debt burdens, especially in an environment of volatile and persistent inflation shocks. This is a crucial consideration for Senate Republicans as they evaluate the nomination.
In light of these economic conditions, BCA Research advises investors to bolster their strategic inflation hedges. The firm recommends favouring gold when economic growth is weak and expanding into broader commodities when growth demonstrates strength. These measures are suggested to mitigate potential risks associated with inflationary pressures and economic uncertainty.
