Fed’s New Governor Stephen Miran Advocates for Bold Rate Cuts

The Federal Reserve has welcomed its newest member, Stephen Miran, who brings a distinct perspective on U.S. economic policy. Appointed by President Donald Trump in September 2023 to fill a vacant seat on the Fed’s Board of Governors, Miran’s unconventional views have sparked debate among his colleagues and economists alike.

In his short time at the Fed, Miran has already made waves by dissenting from the majority opinion during policy meetings. At the October meeting, he opposed the decision to lower interest rates by a quarter point, advocating instead for a larger half-point cut—a stance he had taken previously in September. This assertive approach is coupled with an unusually high level of public engagement; Miran has spoken at over a dozen events and interviews in his first month, a stark contrast to the typical handful of appearances made by new governors.

Miran’s calls for aggressive interest rate cuts echo Trump’s own economic philosophy. He contends that current borrowing costs are putting undue strain on the economy and predicts impending “substantial disinflation.” He expressed these views in a recent interview with Yahoo Finance, describing his perspective as “out of consensus.”

While some analysts are cautious about Miran’s views, others, like David Seif, chief economist for developed markets at Nomura, acknowledge that his ideas are not without merit. “I wouldn’t characterize anything that he’s saying as ridiculous,” Seif noted in an interview, highlighting that the debate centers around the controversial inputs Miran uses in his economic modeling.

Miran’s Economic Rationale

Miran’s case for significant rate cuts is rooted in his support for Trump’s economic policies. In his inaugural speech as a Fed governor, he linked these policies to a lower “neutral rate of interest,” a theoretical borrowing rate that neither stimulates nor restricts economic growth. He cited the administration’s stringent immigration policies, the recent tax and spending legislation, and the implementation of widespread tariffs as factors influencing this shift.

In his analysis, Miran expressed concern about maintaining tight monetary policies for extended periods, warning that it could lead to an induced recession. “If you keep policy this tight for a long period of time, then you run the risk that monetary policy itself is inducing a recession,” he told The New York Times in an interview published on November 1, 2023. He further suggested that the ongoing deportations could relieve pressure on the housing market, contributing to disinflation and allowing for lower interest rates.

Miran has frequently downplayed the inflationary impact of tariffs on consumer prices, a view that has drawn scrutiny. Critics argue that his assumptions do not account for the full economic picture.

Mixed Reactions from Economists

Despite his credentials, including a PhD in economics from Harvard University, Miran’s proposals have met resistance. Former Treasury Secretary Larry Summers criticized his initial address to the New York Economic Club, calling it “analytically weak.” Summers remarked that if this was the best argument for significant interest rate reductions, it fell short of expectations.

Economists on Wall Street have echoed similar sentiments. Michael Feroli, chief U.S. economist at JPMorgan, characterized some of Miran’s arguments as questionable and incomplete, suggesting that they lack persuasive power.

Miran’s views also seem to diverge from those held by other Trump appointees at the Fed. While governors like Christopher Waller and Michelle Bowman share concerns about a potentially weakening labor market, they have not supported the idea of a half-point rate cut nor suggested that the neutral rate of interest is significantly lower than generally accepted.

In a recent speech, Fed Governor Lisa Cook addressed the relationship between lower immigration and housing inflation—central to Miran’s economic rationale. She subtly rejected his premise, stating her focus on immigration primarily relates to its impact on the labor market.

As Miran continues to navigate his role within the Federal Reserve, it remains to be seen whether his perspectives will gain traction or lead to broader discussions on U.S. monetary policy. His approach reflects a sharp divergence from traditional views, and the coming months will reveal how his influence shapes decisions at one of the world’s most critical financial institutions.