The remarks came as oil prices tumbled, with WTI crude futures dropping approximately 5% to around $72 per barrel after unconfirmed reports of progress toward reopening the Strait of Hormuz, a critical chokepoint through which nearly 20% of the world’s petroleum passes.
Hassett argued that the recent spike in headline inflation has been driven almost entirely by higher energy costs, while core inflation has remained nearly unchanged. “If a deal is reached, I expect energy prices to plummet. That would give the Fed sufficient space to take appropriate action and lower rates,” he said, adding that a significant drop could even produce negative inflation figures in the short term.
The economic logic connects directly to household budgets: lower oil prices would reduce gasoline and heating costs, while Fed rate cuts could lower borrowing costs for mortgages, car loans, and credit cards. Markets reacted quickly, with algorithmic traders unwinding long positions that had bet on persistent supply disruptions. Despite the cautious optimism, analysts warned that the situation remains fluid and any setback in negotiations could reverse the move. New Fed Chairman Kevin Warsh, sworn in on May 23, was praised by Hassett for his leadership, though Hassett stressed the importance of the central bank’s independence.
