Miran wanted a bigger Fed rate cut because ‘I don’t see any material inflation from tariffs’
New Federal Reserve governor Stephen Miran said Friday he favored a jumbo-sized interest rate cut at the central bank’s meeting earlier this week because he doesn’t see any inflation from tariffs and believes the central bank’s rate should be closer to a level that doesn’t restrict the economy nor spur it.
“I don’t see any material inflation from tariffs,” Miran said in an interview with CNBC, pointing to prices of imported goods on a “core” basis excluding volatile food and energy.
“You’d think imports would be differentially inflating at a higher pace,” he said.
He also pointed to lower immigration as a disinflationary source, noting reports of 1.5 million migrants who have left the US.
Miran, who joined the Fed board just prior to this week’s meeting, is taking a leave of absence from his role as a White House economic adviser but not relinquishing the job as chair of President Trump’s Council of Economic Advisors.
New Fed governor Stephen Miran, who is also the chairman of the White House’s Council of Economic Advisors. (Photo by Win McNamee/Getty Images) ·Win McNamee via Getty Images
That has prompted concerns from some central bank watchers that his appointment could compromise the Fed’s independence from the executive branch. Trump is also trying to remove Fed governor Lisa Cook, in a case now before the Supreme Court.
Miran was the lone dissent this week in a decision by the rest of his colleagues to cut rates by a quarter point, preferring to cut rates by half a percentage point instead. He is expected to give a major speech at the Economic Club of New York Monday in which he will lay out his views on the economy more thoroughly.
Miran, who plans to return to his White House job early next year, told CNBC that Trump called to congratulate him Tuesday morning, the day the Fed policymakers gathered to discuss their next move, but that he did not talk to the president about how he would vote on policy and has not spoken with him since.
“I will do independent analysis based on my interpretation of the data based on my interpretation of the economy, and that’s what I will do, ” he said.
While Miran didn’t express outright concern about recent weakness in the job market, a factor cited by Federal Reserve Chairman Jerome Powell as justification for the small rate cut, he noted that job growth was weaker than thought over the past year and that keeping interest rates at a level that restricts the economy poses risks to the health of the labor market.
“Being so far above neutral means that monetary policy is quite restrictive, and the longer monetary policy stays that level of restrictive that provides that level of restriction with the labor market, having done what it did last year and through the first half of this year, the greater the risks that we start to miss on the employment,” said Miran.
Federal Reserve Chairman Jerome Powell. (AP Photo/Jacquelyn Martin) ·ASSOCIATED PRESS
Miran confirmed that he was the Fed official who penciled in a total of six cuts this year, an outlier in a so-called “dot plot” released this past Wednesday showing where all central bank policymakers stood on the potential path forward.
When asked whether cutting by 50 basis points would have seemed alarmist, he said he didn’t think so, but that if he had suggested cutting by 100 basis points that would have been.
He said he hopes to convince his colleagues on the Federal Open Market Committee in due time to come over to his view.
“I’ll be making my arguments in coming weeks and months, and I hope that I’ll be able to persuade some of my colleagues as we go along,” he said.
Miran says he expects economic growth to pick up in the second half of the year, as uncertainties around policies from the administration abate and the new tax bill is implemented. But he noted that doesn’t imply anything for monetary policy because he says he views it as pushing potential and actual output at the same time.
Some of his colleagues are clearly more worried about the job market.
Minneapolis Fed President Neel Kashkari said Friday he is more concerned about labor weakness than sticky inflation and that the risk of a sharp rise in unemployment led him to up the number of rate cuts he sees this year to three from two.
“I believe the risk of a sharp increase in unemployment warrants the committee taking some action to support the labor market,” Kashkari wrote.
Though he added the caveat that he doesn’t think the Fed should be on a preset course for a series of rate cuts.
“If the labor market proves more resilient than it seems at the moment or if inflation surprises to the upside, we should be prepared to pause and hold our policy rate,” said Kashkari. “I even remain open to raising the policy rate further if economic conditions warrant it.”
Minneapolis Federal Reserve president Neel Kashkari in 2019. (Photo by Evan Agostini/Invision/AP) ·Evan Agostini/Invision/AP
When he looks at uncertainty surrounding tariffs and the impact on inflation, he says that could last a year or two, but that it would mean inflation of around 3% — not 4% or 5%. Though he says he’s still committed to 2% inflation.
“Unless there is some large increase in tariff rates from here or some other supply side shock, it is hard for me to see inflation climbing much higher than 3 percent given announced tariff rates and the relatively small share of imported goods in overall U.S. consumption.”
He said he is watching inflation expectations carefully and that one that could threaten expectations is any danger to central bank independence.
“A second risk to long-run inflation expectations is one of some political development that damages Fed independence and reduces confidence that the FOMC will set rates appropriately to try to achieve our dual mandate goals,” he said.
“While a serious potential issue, managing it is outside of the control of the FOMC.”
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