Fed Governor Stephen Miran says US interest rates are too restrictive, risking jobs. Learn why he believes the Fed must cut rates aggressively.
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The Fed Has a Lot of Catching Up to Do, Says New Central Banker Stephen Miran
Washington — Federal Reserve Governor Stephen Miran, a close ally of President Donald Trump, has raised alarm that America’s central bank is underestimating the risks high interest rates pose to the labor market. Speaking at his first public event in New York since joining the Fed Board, Miran argued that the Fed is far behind where it needs to be on monetary policy.
Stephen Miran’s First Warning as Fed Governor
Miran, who previously served as Trump’s economic adviser, made clear that the current level of borrowing costs is overly restrictive and could significantly harm job growth.
“Miran cautioned that the Fed’s current stance on interest rates is overly restrictive and could put the central bank’s employment goals at serious risk.”
The warning comes shortly after the Federal Reserve’s first rate cut since December, a move Chair Jerome Powell described as necessary to prevent further damage to the labor market. But according to Miran, the Fed’s cautious approach is still too slow and insufficient.
Why Miran Believes Interest Rates Are Too High
Miran’s analysis centers on the neutral rate of interest — the theoretical point where interest rates neither stimulate nor restrict economic growth.
- He believes the neutral rate is lower than economists currently estimate.
- Trump’s fiscal policies, including his tax and spending bill and strict immigration crackdown, are applying downward pressure on the neutral rate.
- This means the current Fed rate is much tighter than intended, slowing growth and straining the job market.
According to Miran, the Fed’s benchmark rate should be almost 2 percentage points lower. That translates to eight quarter-point cuts — a scale of easing typically reserved for economic downturns.
The Taylor Rule and Trump’s Policies
Miran also highlighted how the Taylor rule, a key guide for monetary policy that factors in inflation, output, and the neutral rate, is being distorted by Trump-era policies.
He explained that:
- Fiscal expansion boosted short-term growth but lowered the sustainable neutral rate.
- Tighter immigration policies may reduce labor supply, complicating inflation and growth forecasts.
- Taken together, these changes mean the Fed should rethink its calculation of “neutral” and adjust rates accordingly.
What This Means for the US Economy
Miran’s sharp critique places him in the camp of doves favoring aggressive rate cuts, in contrast to Powell’s more measured approach. If the Fed follows Miran’s thinking:
- Borrowing costs for mortgages, business loans, and credit cards could fall faster.
- The labor market may see short-term relief, but inflation risks could reemerge.
- Global investors will be closely watching whether the Fed shifts course to align with Trump’s economic agenda.
FAQs
Q1: Who is Stephen Miran?
Stephen Miran is a new Federal Reserve Governor and a former senior official in President Trump’s Council of Economic Advisers.
Q2: Why does Miran think the Fed is behind?
He believes the neutral rate is much lower than current estimates, meaning today’s interest rates are too restrictive for the economy.
Q3: How many rate cuts is Miran suggesting?
Miran argues for the equivalent of eight quarter-point cuts (about 2%), far more aggressive than the Fed’s current pace.
Q4: What role does Trump’s policy play?
Miran says tax policies and immigration restrictions under Trump are pushing the neutral rate down, intensifying the need for rate cuts.
Q5: How could this impact ordinary Americans?
If rates are cut as Miran suggests, loans and mortgages could become cheaper, but there’s also a risk of higher inflation.
Conclusion
Stephen Miran’s first major speech as a Fed Governor makes one thing clear: he believes the central bank is failing to act quickly enough to protect America’s labor market. By calling for up to 2% in rate cuts, Miran is pressuring the Fed to realign its policy with the realities of Trump-era fiscal and immigration strategies.
As the Fed navigates a delicate balance between jobs and inflation, Miran’s remarks set the stage for a heated debate on whether the central bank is already behind the curve.