New Fed Governor Stephen Miran defended his lone call for a 50bps rate cut last week, signaling he would back another such move if given the chance. In a speech overnight, Miran warned that the central bank is underestimating how tight policy is, putting the job market at risk without faster easing.
Miran argued that the appropriate federal funds rate should be in the “mid-2 percent area,” nearly 200 basis points below the current target. He said leaving policy this restrictive risks unnecessary layoffs and higher unemployment, with monetary settings “well into restrictive territory.”
His remarks highlighted the divide inside the FOMC. While Miran sees the economy requiring swift and decisive support, other Fed officials made clear they prefer a slower pace of adjustment.
Atlanta Fed President Raphael Bostic told the Wall Street Journal that inflation remains “too high for a long time” and warned against signaling premature victory. He flatly opposed another cut at the October meeting, indicating that “I today would not be…in favor of it.”
Cleveland Fed President Beth Hammack echoed caution, saying the policy rate is only a “short distance to neutral”. She warned that removing too much restriction could “start overheating again”, urging the Fed to tread carefully, and “stay restrictive to bring inflation back down to target.”
St. Louis Fed President Alberto Musalem said he backed last week’s 25bps cut as a “precautionary” measure to support employment but stressed there is only “limited room for easing further” without risking an overly accommodative stance.
