The White House Thinks the Fed Is About to Hike Into a Slowdown

Hassett argues three-month annualized core CPI already hit the Fed's 2% target, but SPY is down 2% this month with tightening risk still unpriced.

NVDA at 8% and AAPL at 7% dominate SPY, making sustained borrowing costs more consequential for the index than any single Fed meeting outcome.

Hiking into a slowing economy with a near-flat yield curve historically compresses equity multiples, making the next core PCE release the critical data point.

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The day before the Federal Reserve meeting, the White House's top economic official argued that the inflation problem the committee worries about has already faded. Kevin Hassett, director of the National Economic Council, made a specific technical claim: measured over the last three months and annualized, core CPI has fallen to 2%, even as the year-over-year figure the committee tends to cite still looks elevated.

The tension for equity holders is direct. The S&P 500, tracked by the SPDR S&P 500 ETF ( NYSEARCA:SPY ), has slipped over the past month while remaining up double digits on the year, meaning some tightening risk is already in prices and some is not.

The statistical case Hassett made is worth understanding on its merits. It also comes from the one voice in American economic policy with the most direct interest in lower borrowing costs, and the job here is to separate the method from the messenger.

Year-over-year inflation is a rolling twelve-month average that lags turning points, while a three-month annualized rate weights the most recent quarter. At an inflection, the two can point in opposite directions.

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Hassett's specific claim: "If you look at the last three months, that core CPI averaged and then annualized is 0.2. I mean top line is 0.2 and core is two, which is the target. If you look at what it was the three months prior, the top line was eight point something and the core was three point something.", according to White House. If that comparison holds, price momentum has shifted sharply, and a committee focused on the annual figure could tighten after the underlying trend has already cooled.