Kevin Hassett tells the Economic Club of Washington that inflation was in the "high 3s" when Trump took office* and he is confident inflation will return to 2%: "Inflation isn't all the way to where you want it to be, but the momentum is pretty directional" to the downside. *(I'm not sure what measures he's using, 12-month CPI was below 3% and core CPI was in the low 3s and heading lower; the PCE measures were a couple tenths lower) Hassett says he has "high regard" for Jay Powell but that they have policy disagreements at times. "I sort of agreed with the previous two meetings, that it was the right time to cut rates," but Powell's hawkish tone after the last meeting "surprised me" because both the September CPI and the longer-lasting government shutdown argued for a somewhat more dovish bias, rather than a hawkish one. "The president thinks rates could be a lot lower, and I agree with him on that," Hassett says. Hassett downplays concerns that his closeness to the president will compromise his independence. Just the opposite, he says: "Once you trust someone, then you basically have the authority to be independent because you're trusted." The current Fed's behavior "has been uncomfortably correlated with what a partisan might do" and Trump "knows I wouldn't do that." Hassett says the Fed leadership is captured by its staff, which in turns is captured by Keynesian zealotry. Citing his five years as a staff economist at the Fed in the 1990s, he said he's "seen what's good and bad about the way the Fed people think, and there's a lot of bad."(Nick Timiraos)