Fed Governor Myran on Interest Rates, Inflation, and 2026 Economic Outlook

Fed Governor Myran's Dovish Stance on Interest Rates

• 💡 Governor Steven Myran advocates for more than a percentage point of interest rate cuts in 2026, citing a dovish stance.
• 🎯 He believes most excess inflation is due to calculation quirks, particularly in shelter inflation, which lags significantly.
• 🔑 Myran argues that policy should be made for the future (2027) due to policy lags, abstracting from temporary inflation drivers like shelter and portfolio management fees.
• 📊 Underlying inflation, excluding these factors, is estimated to be running at 2.3%, close to the Fed's target.

Rationale for Accommodative Monetary Policy

• 📉 Myran points to an unemployment rate of 4.6%, suggesting a million Americans could have jobs without causing unwanted inflation.
• ⚠️ He criticizes keeping policy too tight, which he believes marks down future growth forecasts.
• 🚀 If policy had been less restrictive, growth expectations would be higher, indicating a missed opportunity for economic expansion.

Inflation Outlook and Potential Risks

• 📌 Myran's disinflation forecast relies heavily on shelter inflation coming down, with research from Goldman Sachs supporting this view.
• ⚠️ A key risk to his forecast is market rents picking up again, which would invalidate the mechanical pass-through assumption.
• ❓ He expresses uncertainty about the drivers of goods inflation, differing from colleagues who attribute it to tariffs.
• ⚖️ Myran emphasizes the return of two-sided risk in the economy, which he feels has not been fully internalized by policymakers.

Economic Perspectives from Seema Shah and Jim Zelter

• 📈 Seema Shah of Principal Asset Management sees a positive outlook driven by fiscal stimulus, monetary normalization, and AI-driven capex.
• 🏛️ However, she notes that government intervention and policy upheaval, particularly concerning housing and tariffs, can give investors pause.
• 🏦 Jim Zelter of Apollo Global Management describes the 2026 outlook as potentially stagflationary, expecting higher-for-longer interest rates.
• 🏌️ Zelter uses a golf analogy, stating the fairway is narrowing and the rough is deepening, requiring more disciplined investing and careful risk management.
• 🌐 Apollo is investing in large companies involved in a global industrial renaissance, particularly in Europe, Japan, and Australia, while being cautious about emerging markets.
• 📉 Zelter highlights the record pace of corporate and government bond issuance, driven by high real yields and demand for long-duration assets, but questions the ultimate funding purpose.
• 💡 He notes that the US economy's structure, including healthy banks and a robust securitization market, makes it harder to trigger a severe recession compared to the past.