National Economic Council Director Kevin Hassett is facing blowback for saying that Federal Reserve Bank of New York staff should be “disciplined” for a tariff report that was unfavorable to the White House.
The criticism comes at a time when the Fed’s independence from the White House is a politically fraught topic. Hassett made the remarks on Wednesday about New York Fed research that found the Trump administration’s tariff policies hurt U.S. companies, calling the report an “embarrassment.”
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Federal Reserve Bank of Minneapolis President Neel Kashkari panned Hassett’s comments at a Thursday event in North Dakota. Kashkari defended the research of the regional banks and drew a direct line between attacks against the Fed and the White House’s desire for lower interest rates.
“This is just another step to try to compromise the Fed’s independence,” Kashkari said. “Over the last year, we’ve seen multiple attempts to try to compromise the Fed’s independence.”
“It’s really about monetary policy,” he added.
Hassett also said the authors of the research should be punished, another escalation in the Trump administration’s fight with the Federal Reserve system.
“I mean, the paper is an embarrassment,” Hassett said Wednesday on CNBC when asked about the New York Fed analysis. “It’s, I think, the worst paper I’ve ever seen in the history of the Federal Reserve system. The people associated with this paper should presumably be disciplined, because what they’ve done is they’ve put out a conclusion which has created a lot of news that’s highly partisan based on analysis that wouldn’t be accepted in a first semester econ class.”
The paper was published last week and has received news coverage for finding that over 90% of the costs of the tariffs were being passed along to U.S. companies and consumers rather than foreign exporters during the first 10 months of 2025. That number fell to 86% in November, according to the study.
Kashkari said that regional Fed research is done to “get better and learn about the economy” by having a wide range of opinions.
“We are doing our very best to make the best assessment of the economy based on data and analysis,” he said.
Douglas Holtz-Eakin, the president of the center-right American Action Forum, also condemned Hassett’s remarks in a memo on Thursday.
“The only one who should be embarrassed is Kevin Hassett, the smell of whom’s burning reputation flavors the air of DC, and who is a bipartisan embarrassment to all who have attempted to inject economic reality to the policy process,” wrote Holtz-Eakin, a Republican who previously served as director of the Congressional Budget Office.
The Washington Examiner asked Hassett for comment or clarification about his Wednesday remarks.
White House spokesman Kush Desai said Hassett respects the independence of the Fed but found fault with the academic rigor of the study in question.
“Director Hassett has consistently made clear publicly his respect for the Fed’s independence — independence that is undermined by flawed research designed for news headlines rather than peer review,” Desai said. “Director Hassett’s comments yesterday were clearly a call for the Fed to return to the practice of upholding the highest of academic standards. This product fell short of that.”
“All institutions, especially the Fed, should strive to uphold the gold standard of rigorous research,” he added in a statement to the Washington Examiner.
An official at the New York Fed declined to comment on Hassett’s remarks about punishing Fed staff when contacted on Wednesday.
The newest escalation between the White House and the Fed comes as Trump has been pushing Fed Chairman Jerome Powell to slash interest rates more aggressively since he entered his second term.
In January, Powell announced that the Justice Department was investigating him and that the Fed received grand jury subpoenas related to testimony he provided to the Senate last year about renovation cost overruns at the Fed headquarters building in Washington. Powell said the inquiry was a pretext to pressure him to lower interest rates.
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Kashkari also mentioned the Justice Department investigation during his Thursday remarks in the context of the Fed sticking to its mission.
“The louder the noise gets turned up, the more we hug the mast of what is our mission,” Kashkari said.