Current policy is ‘considerably restrictive,’ argues governor
Federal Reserve governor Stephen Miran has claimed the central bank needs to slash interest rates further, arguing its benchmark rate is nearly two percentage points too high.
Miran, who took his seat on the Fed board last week after being named by President Trump to replace the outgoing Adriana Kugler, said in remarks Monday at the Economic Club of New York that the central bank’s current stance risked harming the employment outlook.
“The Federal Reserve has been entrusted with the important goal of promoting price stability for the good of all American households and businesses, and I am committed to bringing inflation sustainably back to 2%,” he said.
“However, leaving policy restrictive by such a large degree brings significant risks for the Fed’s employment mandate.”
Miran claimed an immigration crackdown by the Trump administration, as well as lower taxes and fewer business regulations, would prove disinflationary in the long run.
But he also expressed optimism on the growth outlook, not normally viewed as a reason to lower rates. “My view is that policy is roughly two points too restrictive, which is considerably restrictive,” he said.
“Even though I am expecting growth to be a little better in the future, that could get derailed unnecessarily so and create an output gap where one need not exist if we don’t get policy closer to neutral.”
The Fed made its first rate reduction of the year last week, cutting by 25 basis points and bringing its funds rate to a range between 4% and 4.25%. But while 11 members of the Fed Open Market Committee (FOMC) voted for that move, Miran called for a 50-basis-point cut.
His stance aligns closely with Trump’s. The president has been a sharp critic of Fed policy this year and repeatedly claimed it should have brought rates lower earlier, labeling central bank chair Jerome Powell “Too Late” for holding steady.
Miran indicated on the Fed’s so-called “dot plot,” which maps out voting members’ expectations of how economic trends will play out in the coming months, that he anticipates another 125 basis points’ worth of rate reductions in 2025.
Others aren’t so sure. Powell struck a careful tone in remarks at a press conference last week after the Fed’s announcement, while Fed members Alberto Musalem and Raphael Bostic have expressed skepticism about the need for more cuts.
The Fed has two more scheduled meetings on interest rates this year: one on October 28-29, and another on December 9-10.
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