How I Made $5000 in the Stock Market

Miran Is Optimistic About U.S. Economy, but Sees Risks if Rates Not Cut

Oct 07, 2025 11:07:00 -0400 by Megan Leonhardt | #Federal Reserve

Stephen Miran is optimistic about the U.S. economy but says rates need to come down. (Francis Chung/Politico/Bloomberg)

Key Points

Federal Reserve governor Stephen Miran believes that much of the uncertainty that plagued businesses and consumers earlier this year has passed, saying Tuesday he’s optimistic about the economic outlook as long as the central bank resolves risks of more restrictive monetary policy.

“In the near term, I’m not very pessimistic at all about the economy—but I do see some risks lurking there if we don’t adjust policy,” Miran said during a discussion at the Managed Funds Association’s Policy Outlook 2025 event in New York on Tuesday morning.

Miran reiterated his belief that the neutral rate of monetary policy has recently come down relative to where it was a year ago. “That makes monetary policy more restrictive than it was, say a couple of quarters ago, and then additional restrictiveness of monetary policy poses some risks going forward,” Miran said.

The neutral policy rate is the rate that is neither stimulative nor contractionary. If interest rates are below the neutral rate, also known as r-starred, then it provides stimulus, while levels above r-starred hold back the economy.

“It’s difficult to know where the neutral rate is,” Miran said during the Deutsche Bank 2025 Fall Macro Conference on Tuesday afternoon.

But he believes there have been a number of factors that have been “gyrating and pushing it around” in recent years, Miran said. To mitigate the risk of more restrictive monetary policy on the economy, the Fed will need to lower the fed-funds rate, he said. But that is a move that some of his central bank colleagues are less certain is the correct path amid higher inflation.

The Federal Open Market Committee lowered the fed-funds rate by a quarter percentage point to a target range of 4%-4.25% at the September policy meeting because of concern about growing labor market weakness.

Miran acknowledged that his view on rates is different than many other Fed officials, especially in light of how fast he wants to get to the so-called neutral rate. Part of that discrepancy, he said, is because of his view that monetary policy should be forward looking.

“You need to set policy, not necessarily based on where the data were six months ago, but where you think they’re going to be six months to two years from now, depending on your view of how long those lags are,” Miran said.

Miran dissented at the September meeting of the Federal Open Market Committee, voting for a half percentage-point rate cut, while the majority voted to lower rates by a quarter point.

“So one reason for why my dot for 2025 sticks out so much from everyone else’s is because I’m more sanguine on the inflation outlook than a lot of other people are,” Miran said. In the September summary of economic projections, the lowest forecast for the midpoint of the Fed’s target range was 2.88%.

A lot of Miran’s comfort on the inflation outlook comes from the disinflation he expects to occur from housing services, which make up a significant portion of price growth.

“I’m paying, I think, more attention to something like population growth, or maybe I’m giving it a bigger weight—or I think it has a bigger effect. And I’m also less concerned with the inflationary effects of tariffs as well. So that’s part of what makes me more sanguine on inflation than potentially some of my colleagues are,” Miran said.

If there’s a lot more tariff-related inflation than expected, Miran said, that could throw off his forecast. But what is happening on that front is hard to analyze without inflation data from the government.

The Bureau of Labor Statistics and the Bureau of Economic Analysis, which both produce widely used inflation gauges, aren’t publishing any economic data during the current government shutdown. “There are some private sources for prices, but I don’t know that they’re really reflective of the consumption bundles that people actually consume,” Miran said.

Miran also said he views the Fed’s dual mandate of maximum employment and price stability as less in tension than some other Fed policymakers. “There inevitably will be times when the two sides of the mandate do come into tension,” he added. “I don’t think that now is necessarily one of those times, although, you know, some of my colleagues may.”

Miran was confirmed to serve out the remainder of governor Adriana Kugler’s term, which ends in January. When asked specifically if he wants to stay at the Fed, he said he would serve in whatever capacity President Donald Trump needed but reiterated that he doesn’t make personnel decisions.

“I love this country, and I will do whatever job the president asked me to do,” Miran said. “At the Fed, I’m doing my job of analyzing the economy and arguing for I think monetary policy should be.”

Miran added that he hasn’t spoken to spoken to anyone about the administration’s continuing effort to choose a nominee to serve as Fed chair when Jerome Powell’s term ends next year. “Nor do I intend to involve myself in that process in any way,” he said.

Write to Megan Leonhardt at megan.leonhardt@barrons.com