Federal Reserve governor Stephen Miran said recent trade tensions have increased uncertainty in the outlook for growth, making it more important for policymakers to lower interest rates quickly.
“There’s now more downside risks than there was a week ago, and I think it’s incumbent upon us as policymakers to recognise that should get reflected in policy,” Miran said Wednesday during an event organised by CNBC. Higher uncertainty around trade policies between China and the US have introduced a “new tail risk,” he said.
“I wouldn’t say that I want even lower rates now than I did a week or a month ago,” Miran said. “However, with the change to the balance of risks, I think it becomes even more urgent that we get to a more neutral place in policy quickly.”
Businesses across the semiconductor supply chain are bracing for a full blown trade war after President Donald Trump threatened to impose an additional 100% tariff on China last week. The move followed restrictions imposed by the Asian nation on rare-earth mineral exports, to which the US responded it would also consider controls on its sales of “any and all critical software.”
Even before the latest escalation in the trade war, Miran favoured lowering the Fed’s benchmark by an additional one and a quarter percentage points by year’s end. The median projection from the Fed’s 19 policymakers was for two more quarter-point cuts in 2025.
On Wednesday, he said expecting two more rate cuts this year “sounds realistic.”
Fed chair Jerome Powell on Tuesday cemented expectations for a second straight quarter-point rate cut when officials meet later this month. Concerns that slower hiring could spur unemployment are likely to drive the decision, even as inflation remains above the Fed’s 2% goal.
Miran has repeatedly called for looser monetary policy, dissenting against policymakers’ decision to lower the Fed’s policy rate by a quarter-percentage point last month in favor of a half-point cut.
‘Severe FOMO’
Miran has faced criticism for his decision to take a leave of absence from his post as chair of the White House Council of Economic Advisers for a temporary role at the Fed, sparking concerns about his independence from the Trump administration. On Wednesday, he said appointing CEA chairs to the Fed was a practice that “long predates” Trump’s time in office.
When asked which position was more fun, he said he had “severe” fear of missing out recently after news of trade tensions with China broke.
“When I saw the China rare-earth announcement, of course I started imagining what must be going on with my former colleagues,” Miran said. “I was imagining all the meetings that must be happening, and the plans, and what people were discussing, or thinking about doing — and I spent the day discussing whether a small regional bank should be allowed to make some modest change to its loan offerings.”
Source: theedgemalaysia