The Federal Reserve’s newest policymaker, Stephen Miran, continued on Thursday to advocate for significant U.S. interest-rate cuts to prevent a labor market collapse. He argued that his fellow central bankers are more worried than necessary about tariffs driving up inflation.
Other Fed policymakers disagreed.
“Heavy front-loading of cuts before knowing if this is all there is to inflation and before determining if this inflation is persistent poses a risk of error,” Chicago Fed President Austan Goolsbee told reporters after an event in Grand Rapids, Michigan. He described the labor market as stable and only mildly cooling.
“In my view, inflation remains too high while the labor market, though cooling, still remains largely balanced. I see the current policy stance as only slightly restrictive, which I believe is appropriate,” Kansas City Fed President Jeffrey Schmid said in Dallas, Texas.
Even Fed Vice Chair for Supervision Michelle Bowman, who agrees with Miran that tariffs imposed by President Donald Trump are not reigniting inflation, showed little support for his call for deep rate cuts.
“We have a more fragile labor market than we expected,” she said at an event at Georgetown University, explaining her rationale for potentially seeing three quarter-point Fed rate cuts by the end of the year.
The Fed cut the policy rate last week by a quarter of a percentage point, and short-term borrowing costs are now in a range of 4.00%-4.25%. Fed projections indicate that most policymakers favor additional rate cuts this year, but about a third do not feel that further cuts are necessary.
Miran, who was confirmed by the Senate just before the Fed’s September 16-17 meeting, cast his first vote last Wednesday to favor a half-point rate cut.
“It is very clear from the outcome of last week’s meeting that people don’t feel urgent,” Miran said on Fox Business’ Mornings with Maria program. “Part of that is because they are still very scared of tariff inflation…In my mind, there has not yet been material evidence of tariff inflation. And I think that is what is holding up a lot of my colleagues.”
Miran, who is on leave from his job as a White House economic advisor while serving at the Fed, suggested that the policy rate should drop two percentage points in half-point cuts at each upcoming Fed meeting because “when monetary policy is in that restrictive stance, the economy becomes more vulnerable to downside shocks.”
This view aligns with that of Trump, who has criticized the Fed throughout the year for not cutting rates and moved quickly to appoint Miran to the central bank when a vacancy arose in August.
Since his dissent, Miran has delivered a detailed speech in New York and conducted several TV interviews, including two on Thursday, to support his case, which heavily relies on his belief that the policy rate is excessively high, especially with Trump’s immigration crackdown set to induce disinflation.
Goolsbee, who has had nearly as many public speaking engagements as Miran in the past week, adhered to Fed tradition by avoiding direct comments on other Fed policymakers’ views but then proceeded to dissect key parts of Miran’s argument.
“If excessively restrictive rates were pushing the economy toward recession, you’d expect that the cyclical and interest-rate-sensitive parts of the economy would show that, canary-in-the-coal-mine style,” Goolsbee said. But business investment has been “surprisingly strong,” he noted, and while housing is weak, that weakness is not new and isn’t worsening.
In fact, he said, with inflation above the Fed’s 2% target for over four years and trending upwards, even holding the policy rate steady at this point is effectively a rate cut.
Goolsbee also places little value on the notion that a reduction in immigration will reduce overall inflation.
“Normally, we consider a substantial drop in immigration to have an inflationary component, especially in many services …the immigrant share of the workforce in those sectors is much higher than the overall economy,” Goolsbee said.
Regarding the impact on rent inflation, which Miran said is expected to drop now that there are fewer immigrants seeking housing, “anything affecting housing or shelter inflation is almost certainly going to have a long tail,” Goolsbee said.
“Partly due to the way the numbers are calculated and partly due to the nature of the market, I wouldn’t expect any changes in housing inflation to appear in the monthly CPI dramatically, in the immediate term.”
Separately, Kansas City Fed’s Schmid stated that while he felt last week’s central bank interest-rate cut was “a reasonable risk-management strategy as the Fed balances its inflation objective with some heightened concern over the labor market’s health,” further rate adjustments would depend on data outcomes.
