Fed’s Miran Says Rates Should Be 2 Points Lower, Explains Dissent

Stephen Miran was nominated to the Federal Reserve Board of Governors by President Donald Trump. He was confirmed by the Senate last week. (Andrew Harnik/Getty Images)

Key Points

About This Summary

• Fed governor Miran dissented from last week’s decision, saying rates are about two percentage points too high.
• Miran believes changes in immigration, tariffs, tax law, and regulation have pushed down the economy’s neutral rate.
• Miran, a Trump appointee, indicated he would try to persuade colleagues to support deeper cuts at the Fed’s next meeting.

Federal Reserve governor Stephen Miran on Monday explained why he broke from his colleagues at last week’s policy meeting, saying that the central bank has set interest rates about two percentage points too high once structural shifts in the economy are taken into account.

He also vowed not to go along with consensus decisions he doesn’t believe in.

In prepared remarks delivered at the Economic Club of New York, Miran said he supported lowering interest rates by a half-percentage point at the September Federal Open Market Committee meeting. The Fed delivered a quarter-point reduction, and Miran was the lone dissenter on the 12-member panel.

Miran said the appropriate federal-funds rate should be in the low- to mid-2% range, well below the current policy level of 4%-4.25%. He warned that policy is “very restrictive” and risks “unnecessary layoffs and higher unemployment.”

He added that changes in immigration, tariffs, tax law, and regulation have pushed down the economy’s neutral rate of interest, the level at which Fed policy is neither stimulating nor slowing growth. Officials are underestimating how restrictive policy currently is because the Fed hasn’t fully accounted for those shifts, Miran said.

Miran emphasized his views on the new immigration policy under President Donald Trump. Deportations and lower net migration are helping cool rent inflation and suppress population growth, which in turn reduces the neutral rate, he said.

Fed chair Jerome Powell has also noted immigration’s impact, saying tighter border policy has slowed labor force growth and created a “curious balance” in the job market. Unlike Miran, Powell has offered no defense of the changes, treating them as constraints rather than reasons for a shift in monetary policy.

In an op-ed for Barron’s last year, Miran said that the neutral rate would actually be kept higher because “wars and the proliferation of sanctions and tariffs incentivize firms to invest in supply-chain resilience over efficiency, which requires capital expenditures and boosts neutral.”

In the question-and-answer session that followed Monday’s remarks, Miran shared plans to keep pressing his case for steeper rate cuts, even if he remains in the minority. “I will continue arguing for that view,” he said. “And if that means continuing to dissent…then that’s the way it’s going to be. I’m not going to vote for something I don’t believe in, just for the sake of creating an illusion of consensus where there is none.”

He said his goal as a Fed governor is to “lay out my economic arguments as clearly and transparently as I can, and hope to persuade some people by the force of the economics.”

Miran was pressed on whether his service in the Trump White House compromised his independence. He stressed that he would make decisions based on his own analysis, not political direction.

At the same time, he turned criticism back on the Fed, accusing the central bank of straying into politics in recent years.

“There’s no question the Fed had previously gotten over its skis in terms of politics,” he said, referencing its involvement with the Network of Central Banks and Supervisors for Greening the Financial System, a group the central bank pulled out of ahead of President Trump’s inauguration. Nearly all major central banks were members of the group. Powell said at a congressional hearing in 2022 that any direct action on climate change would come from lawmakers and the private sector, not the Fed.

Miran’s speech on Monday also shed more light on the divide inside the Fed as officials debate how to calibrate interest rates. Traditionally, Fed dissents are explained in written statements released after the meetings. Miran said he won’t be issuing one. “A written dissent would be too short. I want to give a full accounting for my views,” Miran told Barron’s.

In a Friday interview on CNBC, Miran indicated he would try to persuade colleagues to support deeper cuts at the Fed’s next policy meeting in six weeks, effectively setting his position well in advance of the inflation, jobs, and economic data due before then.

Trump appointed Miran to a temporary seat that came open this summer. That term expires in January, and Miran probably will have three more votes during his time as a Fed member. He may hold his seat if a replacement isn’t chosen by then or if he is selected by President Trump for another term. His appointment comes as Trump has attacked the Fed for not lowering interest rates fast enough.

Write to Nicole Goodkind at nicole.goodkind@barrons.com