Hassett asks why the Fed is hiking with core inflation at 2%; that 2% leans on a flat June

National Economic Council Director Kevin Hassett on Wednesday questioned why the Federal Reserve is raising interest rates, pointing to recent annualized core inflation of about 2%. "Why are they hiking?" he said at a Georgetown University event, Bloomberg reported. He said officials not appointed by President Trump had been "giving speeches over the last couple of days, saying we need a lot more hikes," and that "there is still a lot of work to do to restore Fed independence," calling that a top priority for Chairman Kevin Warsh, Stocktwits reported, citing Bloomberg.

The Fed's Sept. 16 increase, to a 3.75% to 4% range, was unanimous: the FOMC statement records a 12-0 vote and says "inflation remains elevated." Since then Governor Michael Barr said Wednesday that further increases are likely in his base case (our story). Boston Fed President Susan Collins and St. Louis Fed President Alberto Musalem have also backed the hike, and Musalem said more may be needed.

Where the 2% comes from, and what it hides

Hassett did not specify a series. The closest match in the government data is the three-month annualized pace of core CPI (all items minus food and energy, seasonally adjusted), which works out to 2.0% for May to August, our calculation from Bureau of Labor Statistics data. The month-by-month path tells a different story:

A flat June does most of the work in the three-month number. July and August together ran at about a 3.1% annual pace. Over six months the pace is about 2.6%, and core prices are 2.4% higher than a year earlier on the unadjusted index. None of those reads 2%. The Fed also targets a different gauge, the PCE price index, though the direction usually matches.

The bond market sided with the Fed

Treasury's daily yield curve shows the two-year yield at 4.85% on Wednesday, up from 4.71% on Tuesday. That is well above the top of the Fed's 4% range, which is how traders signal they expect more hikes, not fewer. The 10-year closed at 5.11% and the 30-year at 5.40%. Hassett said markets were "worried, too." If so, the worry shows up as higher yields, not bets on cuts.

Who it hits

Pressure from the White House does not lower anyone's borrowing costs until the Fed acts, and nothing in Wednesday's data points that way. For a business with a floating-rate line of credit tied to prime or SOFR, each further quarter-point increase adds $625 a year in interest per $250,000 drawn, about $52 a month. The one-month Treasury bill was at 3.99% Wednesday, which shows where short-term money is already priced. The next inflation and jobs reports are on our calendar, and the 10-year chart tracks the long end.

Sources: Bloomberg via Stocktwits; Federal Reserve FOMC statement, Sept. 16, 2026; BLS core CPI; U.S. Treasury yields. Inflation rates and interest figures are our calculations. This is market information, not investment advice.