New Impetus at the Fed: Miran's Unconventional Interest Rate Strategy Meets with Skepticism

The latest decision-maker of the Federal Reserve, appointed by President Donald Trump, presented a remarkable argument for an aggressive rate cut on Monday. This aligns with the president's demands, but he remains an outsider within the central bank. In his first speech as a Fed governor, Stephen Miran stated that the neutral interest rate has fallen this year due to tariffs, immigration restrictions, and tax policy. These developments lead him to conclude that interest rates should be significantly lower to avoid jeopardizing the economy. "Monetary policy is in a restrictive area," Miran declared at the Economic Club in New York. He warned that overly tight interest policies could lead to unnecessary layoffs. At the last meeting of the Federal Open Market Committee, Miran opposed the consensus of decision-makers who cut the interest rate by a quarter point, as he considered a half point to be more appropriate. Miran, who was previously the chairman of the Council of Economic Advisers at the White House and now acts unpaid at the Fed, suggests further cuts. Some Fed officials do not share Miran's assessment and currently see no reason for further reduction. At the same time, Miran remains steadfast in his position and hints at representing dissenting voices more frequently in the future. The financial world initially reacts skeptically to Miran's radical proposal, and some Fed representatives also warn of the danger of the economy overheating. Miran's interesting proposal to reconsider the Fed's fixed inflation target, as he believes inflation is difficult to measure, is noteworthy. Before the Fed abandons the target, it must be consistently achieved over a longer period. Starkly differing views from colleagues like St. Louis Fed President Alberto Musalem or Cleveland Fed President Beth Hammack, who warn against hasty actions, highlight the debate within the central bank over the right monetary policy course.