White House National Economic Council advisor Kevin Hassett said on Wednesday that inflation is continuing to ease, expressing confidence in Federal Reserve Chair Warsh amid the latest inflation data.

When asked whether he had confidence in Fed Chair Warsh, Hassett responded "of course." He noted that Warsh's job has become easier following the day's inflation figures.

Hassett described Warsh as a realist who is serious about returning inflation to the Federal Reserve's 2% target. He said Warsh will follow what the data indicates he should do. The Fed's 2% target has served as its formal inflation benchmark since 2012, and policymakers have spent the past several years working to close the gap after inflation reached multi-decade highs in 2022.

The White House advisor also contrasted the current administration's fiscal approach with the previous one, stating that this administration will not engage in the reckless spending seen during the Biden administration. Federal spending and its relationship to inflation have been a persistent focus of economic policy debate, with economists across the spectrum having examined the role of pandemic-era fiscal stimulus in driving subsequent price pressures.

When asked whether there is a market bubble, Hassett said no, pointing out that AI companies are generating profits. The revenue and earnings produced by leading AI firms have been widely cited as a distinguishing feature of the current AI cycle compared with earlier technology booms, when valuations frequently outran underlying business performance.

The yield curve is steepening, with the 2-year Treasury yield down 1 basis point at 4.225%. The 10-year yield is up 4.7 basis points at 4.667%, and the 30-year yield is up 6.9 basis point at 5.213%.

Higher long-term Treasury yields raise borrowing costs across the broader economy because they influence rates on 30-year mortgages, corporate bonds, auto loans, commercial real estate financing, and state and local government borrowing.

As those borrowing costs rise, housing activity tends to slow, businesses become more selective about capital spending, consumers may postpone large purchases, and government interest expense increases, worsening budget deficits.

In effect, the bond market tightens financial conditions even if the Federal Reserve takes no action. According to this framework, the strategy for Warsh in bringing inflation lower is to let the game play out — meaning the data and its economic impact — rather than focusing on the referee, the Fed itself.