Hassett backs call for Fed presidents to come from districts
(Bloomberg) -- National Economic Council Director Kevin Hassett backed Treasury Secretary Scott Bessent’s call for a new residency requirement in the appointment of presidents of Federal Reserve banks.
“The reason we have all these regional Feds is that we want to make sure that we have a federalist system, where the different regions of the country that have different concerns” have voices at the table, Hassett, a frontrunner to become the next US central bank chief, said Friday on Fox Business.
Bessent on Wednesday said he will push for a new rule that candidates for regional Fed presidents must have lived in that district for at least three years — the latest move in a sweeping push to remake the Fed, which the Trump administration has accused of “mission creep” beyond monetary policy.
Fed presidents serve terms that are up for re-authorization every five years by the Board of Governors in Washington, with the current terms coming up in February. Asked whether a residency guideline would “derail” the approvals in February, Hassett said “that’s something I’ve not discussed with everybody yet.”
The NEC chief, whom Bloomberg reported last week is the top candidate to succeed Chair Jerome Powell when his term is up in May, was also asked whether President Donald Trump plans to veto any Fed president who hasn’t lived in their district for three years. Hassett said “I’ve not discussed that with him.”
No Firing
Under the current structure, there is no statutory role for the US president, as the regional boards — excluding those who work at financial institutions — nominate a head for their district, with the Fed Board of Governors voting to approve them. Unlike for governors, the Senate doesn’t confirm the picks.
“The unfortunate thing about the current design of the Federal Reserve is that the only folks who always get a vote on interest rates are the people who live in Washington and the people who live in New York,” Hassett said. He said he and Bessent had discussed changing that, while adding, “I think it wouldn’t require anybody to go in and fire anybody who’s there now.”
Hassett reiterated his expectation that Fed policymakers will lower interest rates at their meeting next week. “It’s a good time for the Fed to cautiously reduce rates again,” he said.
Hassett also said he anticipates a boom in economic growth in early 2026 as the country bounces back from a hit from the recent federal government shutdown and sees the fruits of new factories coming online. And he predicted a surge in productivity, helped by investments in artificial intelligence.
Growth Expectations
“I think we could be looking at a 4% productivity increase next year, given how much acceleration there is in AI,” he said. Adoption of AI across the economy is “moving much faster” than seen with the internet and computing surge of the 1990s, he said. Faster productivity will in turn propel wages, he predicted.
The US hasn’t seen a 4% productivity growth figure for any year since 1999, excluding 2020 and 2009, when figures were distorted by major economic downturns. Over the past half century, there’s been just six years of 4% or higher gains.
Barring some “black swan” disruption, “we’re looking at one of the golden years in economic history” for 2026, Hassett said. He added that he would be “disappointed” with a 3% growth pace for the first and second quarters. “It could easily be a percent higher.”
(Updates with context on president having no role, in first paragraph after ‘No Firing’ subheadline.)
