Fed Debate: Interest Rate Turnaround in Fast Motion or Cautious Withdrawal?

Stephen Miran, member of the Board of Governors of the United States Federal Reserve, is making a significant statement with his recent call for rapid interest rate cuts. Compared to his colleagues on the central bank council, Miran takes a particularly aggressive stance on adjusting current interest rate policy. Miran, a former Trump appointee, views the current target range of the key interest rate of 4% to 4.25% as well above the neutral level and therefore economically restrictive. In an interview, he emphasized, "It is crucial to make adjustments faster rather than waiting. The more restrictive the monetary policy is, the more vulnerable the economy becomes to negative shocks." Last week, the Federal Reserve decided on a 0.25 percentage point rate cut, the first of 2025. Miran, however, was disappointed that his preferred half percentage point cut was rejected. Meanwhile, Fed Chairman Jerome Powell continues to pursue a cautious course. The milestones of interest rate reversals are accompanied by trade policies that were elevated under Trump, which could pose inflation risks. Miran advocates for a series of swift interest rate cuts of 50 basis points each to quickly achieve monetary neutrality. Only once neutrality is reached should the future course be designed more cautiously, according to his conviction.