Fed’s Miran makes an outlier’s argument for cutting rates

US Federal Reserve

The Federal Reserve’s newest policymaker, appointed by President Donald Trump, laid out his argument for aggressively lowering interest rates on Monday, presenting a view that aligns with the president’s demands but which makes him an outlier at the central bank.

In his first policy speech since joining the Fed, Governor Stephen Miran argued that the neutral rate of interest — where the policy rate neither stimulates nor weighs on the economy — has been pushed lower this year by tariffs, immigration restrictions and tax policy.

That means interest rates should be much lower to prevent damaging the economy, he said.

“The upshot is that monetary policy is well into restrictive territory,” Miran said Monday in prepared remarks for an event at the Economic Club of New York. “Leaving short-term interest rates roughly 2 percentage points too tight risks unnecessary layoffs and higher unemployment.”

Miran participated in last week’s Federal Open Market Committee meeting, where policymakers lowered interest rates by a quarter percentage point for the first time since December, to a range of 4-4.25%. Miran dissented, preferring instead to lower rates by a half percentage point.

Until his appointment to the Fed, Miran served as chair of the White House Council of Economic Advisers. He didn’t resign from that post but is taking an unpaid leave of absence. His term as governor expires at the end of January, though it’s unclear how long he might stay.

Miran indicated in rate projections released last week that he preferred to cut rates by a total of 1.5 percentage points this year. Since his estimate of the neutral rate is so low, it would be better, he argued, to move toward it more quickly.

By contrast, the median projection of the Fed’s 19 officials has them lowering rates by another half percentage point.

“It’s not a panic — a panicky move would be something like 75 basis points or more,” Miran said in a question-and-answer session following his speech. “I’m not panicked, I just see that the risks grow the longer you remain significantly above neutral.”

Miran added he’d likely continue to dissent at future Fed meetings.

“Until my view changes, I will continue arguing for that view and if that means continuing to dissent, that means continuing to dissent,” Miran said. “I’m not going to vote for something I don’t believe in just for the sake of creating an illusion of consensus where there is none.”