Stephen Miran urged a half-point rate cut, arguing the Fed’s stance is too restrictive
Federal Reserve governor Stephen Miran renewed his push for a 50 basis point rate cut in December, warning that the central bank’s current policy risks tipping the economy into a downturn.
Speaking Monday on the Bloomberg Surveillance television program, Miran said, “The Fed is too restrictive, neutral is quite a ways below where current policy is. Given my rather more sanguine outlook on inflation than some of the other members of the committee, I don’t see a reason for keeping policy as restrictive for a long period of time as we are. The longer you keep policy restrictive, the more you run the risk that monetary policy itself causes a downturn in the economy.”
Miran’s comments came after last week’s committee meeting, where he dissented in favor of a larger cut.
“I approached it the same way we approached the first one,” he said, referencing his earlier advocacy for a half-point move. “I think that neutral is quite a ways below where current policy is.”
He argued that the Fed’s approach, if maintained, could amplify risks to the economy, especially as monetary policy works with long and variable lags.
Neutral rate shifts and policy lags
Miran explained that shifts in the neutral rate—driven by factors like population growth and fiscal deficits—mean that policy has “passively tightened” through 2025, even as the Fed has cut rates.
“If neutral is here and policy’s up here, you’re very tight. If neutral is here and policy’s down here, you’re very loose. But if you stay where you are and then neutral goes down, you passively tightened because the neutral rate has shifted and so policy has grown tighter over the course of the year,” he said.
Asked why he didn’t push for a 75 basis point cut, Miran said, “We’re a fair way from neutral. I could imagine getting there in a series of 50 clips. I don’t think the economy is dysfunctional right now. I don’t think that financial markets are dysfunctional right now. I don’t think we need to move even faster than that for those reasons.”
Meanwhile, three top Fed officials pushed back against expectations of another interest rate cut in December, warning that persistent inflation still poses risks despite a weakening labor market.
Dallas Fed President Lorie Logan, Cleveland’s Beth Hammack, and Kansas City’s Jeff Schmid each expressed reservations following last week’s decision to lower the benchmark interest rate by 25 basis points to a range of 3.75%–4%.
Financial markets not the full story
Responding to Schmid’s assertion that policy is only modestly restrictive and that financial conditions appear easy, Miran countered, “Financial markets are driven by a lot of things, not just monetary policy. For example, new technologies can push financial markets higher, but that doesn’t necessarily tell you anything about the stance of monetary policy.”
He added, “Some of the financial conditions that look the easiest—things like the stock market, various parts of credit spreads—are not necessarily the financial conditions that feed the most into economic activity. If you look at financial conditions that affect housing, I think they’re quite tighter.”
Forward-looking policy and data challenges
Miran also flagged the risk of being “excessively data dependent,” especially during periods of government data disruption.
“Being excessively data dependent makes you backward looking, because the data are always backward looking and because of collection lags,” he said.
He emphasized the importance of forecasts and noted that alternative data on the labor market suggests “continual ebbing of demand, which again is a signal that policy is too tight.”
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