CNBC Fed Survey: Respondents believe Kevin Hassett will be next Fed chair

CNBC Fed Survey: Jackson Hole Edition Summary

Key Concepts:

• Presidential pressure on the Federal Reserve (Fed)
• Potential replacements for Fed Chair Jerome Powell
• Neutral vs. hawkish/dovish Fed policy
• Tariff inflation
• Fed Funds Rate
• Inflation expectations
• Fed independence

I. CNBC Fed Survey Results: Jackson Hole Edition

• Presidential Pressure: The survey highlights "unprecedented presidential pressure" for a rate cut.
• Potential Fed Chair Replacement:
  • Most Likely Pick (According to Respondents): Kevin Hassett (NSC Director) leads, followed by Chris Waller (Fed Governor), Kevin Warsh (Former Fed Governor), James Bullard (Former Saint Louis Fed President), and Nikki Bowman.
  • Who President Should Pick (According to Respondents): Warsh is favored, followed closely by Waller and Bullard. Hassett drops to fourth.
• Powell's Speech Expectation: 70% of respondents believe Powell's speech will be neutral. 14% expect a dovish stance, and 14% suggest it might not focus on policy or the economy.
• Rate Cut Expectations: Respondents still anticipate two rate cuts: 25 basis points in September and 25 in December, with an additional 50 basis points next year.
• Tariff Inflation: 63% believe substantial price increases from tariffs are on the way.
• Inflation Outlook: Inflation is expected to remain around 3% this year and next year, a percentage point above the Fed's target.

II. Fed Independence and Coordination

• Perception of Fed Independence: 41% of respondents believe the next Fed Chair will conduct policy independently of the President. 37% think it will be in coordination, and 22% are unsure.

III. Historical Context and Unprecedented Pressure

• LBJ Example: Joe Kernen mentions a historical example of President Lyndon B. Johnson physically pressuring Fed Chair William McChesney Martin.
• Public vs. Behind-the-Scenes Pressure: The discussion emphasizes that while behind-the-scenes pressure may have occurred in the past, the public pressure from the current administration is unprecedented in the last 20-30 years.
• Public Campaigning for Fed Chair: The panel notes the unusual public campaigning for the Fed Chair position, contrasting it with past norms where potential nominees would avoid public comment during the selection process.

IV. Impact on the Federal Reserve's Reputation

• Public Perception: There's concern that the political pressure on the Fed could damage its public reputation, potentially leading to a divided public opinion where half the country blames the Fed for economic problems.

V. Zervos' Perspective on Powell's Performance

• Powell's Successes: Zervos (mentioned in the discussion) is cited as making a case for Powell's success in bringing down inflation without causing a recession.
• Inflation Expectations: Zervos also highlighted Powell's success in keeping inflation expectations under control despite the presidential pressure.
• Consensual Decision-Making: Zervos emphasized that the Fed is a consensual body, and no individual can act as a dictator.

VI. Upcoming Coverage

• The coverage will continue with interviews of Kansas City Fed President Jeff Smith and Cleveland Fed President Beth Hammack, along with coverage of Fed Chair Powell's speech.

VII. Conclusion

The CNBC Fed Survey reveals concerns about presidential influence on the Fed, uncertainty about the next Fed Chair, and expectations for further rate cuts despite inflation concerns. The discussion highlights the unprecedented nature of the public pressure on the Fed and its potential impact on the institution's reputation. The upcoming Jackson Hole Economic Symposium and Powell's speech are crucial events to watch for further insights into the Fed's policy direction.