Fed’s Miran Pushes Another Rate Cut. A Smaller Move Could Be Enough.

Stephen Miran, shown during a Bloomberg Television interview on Nov. 3. (Victor J. Blue/Bloomberg)

Key Points

• Federal Reserve governor Stephen Miran indicated he could support a quarter percentage-point rate cut in December.
• Miran believes rate decisions should be based on the economy’s future state, not current inflation or labor market data.
• Miran suggests housing, not equity markets, is a better indicator of monetary policy’s effect on the economy.

Federal Reserve governor Stephen Miran said Monday he could support a quarter percentage-point rate cut at the Fed’s December meeting, even though he continues to see a stronger case for a half-point move.

“Nothing is certain. We could get data that would make me change my mind between now and then,” he said in an interview on CNBC. “But failing new information that makes me update my forecasts…I would think that [half a point of cuts] is appropriate, as I have in the past, but at a minimum [a quarter point.]”

Miran, a recent Trump appointee and White House official, dissented at the past two policy meetings, favoring a larger cut while the committee reduced rates by a quarter-point each time. His comments on Monday suggest he could support the same size move next month if the economic outlook hasn’t meaningfully changed.

Rate decisions, he said, should be based on where the economy will be next year, not on the most recent readings on inflation or the labor market.

“If you’re making policy for what the data are now, you are backward looking, because it will take 12 to 18 months for that to hit the economy,” he said.

Miran also pushed back on using strong equity markets and tight credit spreads as an indicator of whether financial conditions are restrictive or expansionary. Housing is a better way to assess whether looser monetary policy is affecting the economy, he says.

“When I think about what matters more for economic growth, and therefore for the labor market and for our price mandate, it’s absolutely going to be housing relative to equity markets any day of the week,” he said.

Headline inflation readings, he said, are being lifted by components that are estimated rather than directly observed, like shelter. Measures that strip volatile components from the readings he said, show price growth closer to the Fed’s target.

The central bank’s December meeting comes as officials weigh heightened risks to both sides of their dual mandate of stable prices and full employment. While inflation has eased from recent peaks, it has remained above the Fed’s 2% goal for nearly five years. The labor market, meanwhile, has shown signs of cooling, but without a sharp rise in unemployment.

Chair Jerome Powell warned after the October policy meeting that another rate cut wasn’t guaranteed. “Far from it,” he said. Several policymakers have recently indicated that they would support keeping interest rates on hold in December, though they have also noted that the lack of economic data resulting from the government shutdown has made it harder to assess the economy’s strength.

Miran’s remarks could mean that he is prepared to support a smaller move if his outlook holds, even as he continues to argue that the current policy stance risks tightening financial conditions further.

San Francisco Fed President Mary Daly, meanwhile, published a blog post Monday noting that policymakers should “keep an open mind” as they assess how shifts in the labor supply, investment, and tariff-related price changes play out.

Daly didn’t indicate support for a move in December and focused on distinguishing temporary price effects from longer-term changes in the economy.

Still, Miran is positioning for one. A quarter-point move could mean he votes “yes.”

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