'Doubtful, Incomplete': Wall Street rejects Miran's Fed Call

(Bloomberg) – Federal Reserve Governor Stephen Miran can still hope to persuade his colleagues in the central bank that there is a case for dramatic reduction in interest rates. But he did not convince much on Wall Street. Economists poured cold water on Miran’s first major policy speech, arguing that the Trump administration’s policy – on trade, immigration, tax and regulation – significantly reduced the level of interest rates to protect against inflation. This indicates that the Fed’s benchmark rate is now far too high, Miran said, arguing that policymakers recognized this fundamental change. “We find that some of his arguments are questionable, others incomplete and almost anyone persuasive,” said JPMorgan Chase & Co. ‘s Michael Feroli written to clients in a note. Miran was confirmed just in time to the Fed’s Council of Governors for the Central Bank’s September 16-17 meeting, against which policymakers lowered interest rates by a quarter percentage point after stopping them all year. He fell in favor of a larger half -point reduction and gave his first public speech last week in support of his argument. Miran spoke to the Economic Club of New York on September 22, demanding that the rate cuts come quickly to come what policymakers call the neutral level, which does not stimulate or impede economic growth. He added that he would probably also differ at the upcoming Fed meetings if it is necessary to make his point. Immediate outlier The speech has Miran – who has been appointed to fill a vacancy with the Fed by President Donald Trump after serving as a top economic adviser in the White House – an outlier at the central bank. Fed officials were on the lookout of the rate cuts this year with inflation still far above their 2%goal, but eventually decided to perform this month with signs of weakness in the labor market. Since the meeting, many policymakers have been reluctant to endorse additional cuts, let alone the movements in the succession. Alberto Musalem, president of St. Louis, said there is a ‘limited room’ for more relief, given increased inflation, while Mary Daly – the Fed head of San Francisco who says his additional reduction supports – is still unclear. Their hesitation was reinforced on Wednesday by a report showing that the US economy grew in the fastest rate in almost two years in the second quarter. Other data that day on August orders for business equipment and the shortage of goods trading is good for the third quarter growth, and an exemption Thursday has dropped the initial applications for unemployed benefits to the lowest since mid -July. What Bloomberg Economics says … “With inflation running above the target for more than four years, and consensus indicating a still high inflation and modest unemployment in the coming years, the burden of proof is in the argument for extreme relief at Miran.” – Tom Orlik and Jamie Rush. To read the full note, click here, but Miran doubled his view. In two television interviews on Thursday, he said the Fed is at risk of damaging the economy by not moving fast, and setting out a plan to reach neutral through a ‘very short series’ of half-point cuts. Another report on Friday showed that consumer spending rose on a solid cut in August, while the Fed’s preferred meter of underlying inflation was stubborn at 2.9%, almost a full point above the central bank’s target. “There is no support in this report for Stephen Miran’s suggestions that policy interest rates should be cut immediately, and with many,” Carl B. Weinberg, chief economist of the high frequency economy, said in a note after Friday’s data. “There is indeed no recommendation in these numbers for any relief of financial conditions!” Not all economists have completely set aside Miran’s view. Neil Dutta, head of economics at Renaissance Macro Research, said the neutral rate is probably slightly lower than the Fed thinks, which is why the policy is limiting. But he doubts that neutral is as low as Miran says. “If the actual neutral rates were zero, as he claims, the economy and financial markets would have already collapsed,” Dutta said in ‘Ne -post after Miran’s Monday speech. “It’s hard to reconcile an economic golden age with a neutral rate of zero.” -With help from Jonnelle Marte. More stories like these are available on Bloomberg.com © 2025 Bloomberg LP