Federal Reserve Governor Stephen Miran has signaled a potential shift in his approach to monetary policy, indicating his willingness to support an interest rate reduction. This development departs from his prior actions of symbolic dissent, where he previously advocated for more aggressive cuts. His current stance suggests a pragmatic decision to avoid causing unnecessary economic damage, even if it means compromising on his more hawkish views regarding rate adjustments.
This change in approach was brought to light by Sara Eisen, co-host of CNBC’s “Squawk on the Street,” who revealed her recent conversation with Miran. According to Eisen, Miran articulated that he would not oppose a rate cut if it facilitated its approval, emphasizing that he would not "inflict real harm on the economy just to make a rhetorical point." This statement comes at a time when the Federal Reserve is experiencing internal disagreements, which have led to uncertainty regarding the possibility of another rate cut in December.
Miran, who was appointed to the Federal Reserve Board by former President Donald Trump in August of the current year, has been a vocal proponent of substantial interest rate reductions. He notably cast dissenting votes in the two most recent Federal Open Market Committee (FOMC) meetings, where he advocated for a 50-basis-point cut. This contrasted with the majority's decision for a 25-basis-point reduction. The voting record at one such meeting illustrated a clear division, with a 10-2 split, as Kansas City Fed President Jeffrey R. Schmid opposed any rate adjustments. Miran has consistently argued that the appropriate federal funds rate should be significantly lower than its current level, warning that restrictive policies could jeopardize the Fed's mandate concerning employment.
Miran's persistent calls for aggressive rate cuts, which largely align with Trump's views, have led to questions about his impartiality as a Federal Reserve Governor. Senator Elizabeth Warren (D-Mass.) publicly criticized his recent dissents, implying that he was acting as "Donald Trump's sock puppet at the Fed." Economist Justin Wolfers shared similar concerns, suggesting that Miran's actions were primarily symbolic, intended to portray him as aligned with Trump's agenda within the central bank. Wolfers also highlighted the unusual nature of dissenting in one's initial meeting, further fueling speculation about Miran's motives.
As the Federal Open Market Committee meeting approaches on December 9 and 10, the financial markets are closely watching these developments. The CME Group’s FedWatch tool currently indicates an 84.7% probability of a 25-basis-point rate cut. This high probability reflects the market's anticipation of a policy adjustment, potentially influenced by statements like Miran's, which suggest a growing consensus or at least a reduced resistance to such a move within the Fed. The upcoming decision will be crucial in shaping economic forecasts and market sentiment for the foreseeable future.