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Fed Governor Stephen Miran wants the central bank to apply a “brisk pace” in its rate cuts, differing from the opinion of other officials who advocate for a cautious approach. Dallas Fed President Lorie Logan and Chicago Fed President Austan Goolsbee are among the Fed officials who raised concerns about economic and inflation conditions.
Fed Chair Jerome Powell also noted that large rate cuts lack support, emphasizing a policy consensus that balances the central bank’s monetary policy approach. He claimed that making significant policy moves at this time is unnecessary.
JPMorgan CEO Jamie Dimon expressed doubt about future rate cuts unless inflation drops. Alberto Musalem, President of the Bank of St. Louis, also warned that the Fed is edging closer to its rate cut limits.
Miran says policy is out of whack
Miran said that the Fed’s monetary policy is out of whack, and reasonable adjustments should be made briskly. However, he remains skeptical about the central bank’s current interest rate policy, pointing out that the Fed might not have reached that point yet.
Miran believes that the Fed is at a point where, if it keeps the current interest rate steady for another day, it will be in crisis. However, he foresees a bigger problem in the Fed’s hands if the current rate is held for an extra year.
“If you sort of keep it there another day, it’s a crisis, but if you keep it there for an extra year, yeah, I think you have…problems on your hands.”
–Stephen Miran, Governor of the U.S. Federal Reserve
Miran said on September 22 that leaving the policy restrictive to the current extent risks significantly compromising the Fed’s mandate. He and other FOMC members also believe the neutral rate is not where it ought to be due to President Trump’s policy changes.
Miran further explained how deregulation, tax, immigration, and trade policy changes are either increasing nominal savings or boosting productivity in ways that lower the neutral rate. He added that these changes make monetary policy that was not as tight at the beginning of the year, now too restrictive.
Bowman predicts three rate cuts in 2025
Michelle Bowman, a member of the Fed board of Governors, predicted on October 3 that the Fed would make three rate cuts before the end of the year. Bowman, who also serves as the current Vice Chair of Supervision, pointed out that these cuts would counter labor market risks and support the economy’s stability as inflation neared the 2% target.
However, Miran’s preference for bolder rate cuts places him at odds with most policymakers. Most regional Fed presidents still worry about lowering rates at the current inflation rate, which has remained well above the 2% target. Policymakers also believe that Trump’s tariffs will accelerate inflation as their effects surge through the economy.
Miran advocated for a 0.50% rate cut in the next rate-setting meeting, but most officials called for a moderate trim to the 4% to 4.25% range. Fed officials seek to strike a balance between lowering high inflation and supporting the weakening jobs market.
The officials further predicted an interest rate target between 3.5% and 3.75% by the end of 2025, with a likelihood of moving to the 3.25% to 3.5% range in 2026. However, Chicago Fed President Goolsbee believes the central bank is now in a sticky spot. He remains a little wary about front-loading too many rates and hoping that inflation will subside.
Meanwhile, Dallas Fed President Logan remains hawkish and claims that the Fed needs to be cautious about further rate cuts. She previously pointed out that the worrisome environment suggests high inflation is driven by more than just tariff-related issues.
Bowman also believes that the Fed policy is at risk of falling behind the curve, especially in offsetting labor market risks. However, Miran stresses that his approach is similar to that of other policymakers, only that he wants to reach the goal faster.
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