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New Fed Governor Advocates for Significant Monetary Easing
Federal Reserve Governor Stephen Miran has called for substantial interest rate reductions in his first major policy speech since joining the central bank. The newly appointed governor argued that significant cuts are necessary to prevent unnecessary damage to the U.S. labor market, aligning with President Trump's demands for lower borrowing costs.
Policy Divergence Within the Fed
Miran's stance represents a significant departure from the majority view within the Federal Open Market Committee. Last week, the Fed lowered its target rate by a quarter percentage point to a range of 4.00% to 4.25%, but Miran was the sole dissenter advocating for a 50 basis point reduction.
"I believe the appropriate fed funds rate is around 2 percent, which is nearly 2 percentage points lower than current policy," Miran stated during his address to economists in New York.
Economic Transformation Under Trump Administration
The Fed governor contended that the U.S. economy has fundamentally changed since Trump returned to power, developments that have depressed the neutral interest rate. This shift, according to Miran, allows the Fed to pursue lower rates without inflation concerns.
Miran pointed to the administration's strict immigration policies as a factor that will lower interest rates by limiting housing rent increases and reducing investment demand. The White House's tariff policies will also exert downward pressure on rates, he argued, dismissing concerns that tariffs might keep inflation elevated.
Internal Opposition and Market Expectations
Miran's views are likely to face resistance from colleagues who remain more concerned about inflation. St. Louis Fed President Alberto Musalem expressed caution about further rate cuts this year, while Atlanta Fed President Raphael Bostic indicated hesitation about supporting additional reductions due to inflation worries.
Meanwhile, financial markets are pricing in additional rate cuts. According to the CME FedWatch Tool, expectations for reductions in October and December stand at approximately 80%. The policy divergence highlights the challenges facing the Fed as it navigates competing economic priorities.
Source: Federal Reserve
