Federal Reserve Governor Stephen Miran on Recession Risks and Policy Adjustments

Recession Risks and Policy Adjustments

• ⚠️ Governor Stephen Miran believes the Federal Reserve risks sparking a recession if it doesn't continue lowering interest rates next year.
• 📈 He notes that the unemployment rate has risen, which should push policymakers towards a more dovish stance.
• 💡 Miran advocates for adjusting policy downward to reflect a perceived decrease in the neutral rate, warning that failure to do so increases recessionary risks.

Inflation Measurement and Data Interpretation

• 📊 Miran discusses distortions in economic data, particularly shelter inflation, due to factors like government shutdowns and long measurement lags.
• 🔍 He argues against cherry-picking inflation data, emphasizing the need to be clear-eyed about both upward and downward biases in measurements.
• 🗣️ He believes that market rents, running at about 1% for two years, are not indicative of significant price pressures in housing, despite measured inflation lags.

Fed Policy and Committee Dynamics

• 🎯 Miran has argued for larger rate cuts, voting for a 50 basis point cut at the Fed's last meeting.
• 🤝 He emphasizes the importance of avoiding groupthink within the committee and introducing a wider variety of views.
• 📉 While acknowledging the need for significant cuts when policy was high, he notes that as rates decrease, the need for large cuts diminishes, potentially shifting towards smaller, steady adjustments.

Tariffs and Economic Impact

• 🏷️ Miran pushes back against the consensus that tariffs are a significant driver of inflation, citing counterfactual analyses.
• 📉 He argues that imported goods and US core goods are not inflating at rates that would indicate a significant tariff shock.
• 💡 He suggests that the focus on tariffs as an inflation driver might be a complacent view, especially when core goods inflation bottomed out before tariffs were implemented.

Future Policy and Fed Leadership

• ❓ Miran has not yet decided whether to push for a 25 or 50 basis point cut at the next meeting, pending further data.
• 🏛️ He discusses the potential for his continued service if a successor is not confirmed by his term's end.
• 👍 He expresses high respect for Kevin Hassett and Christopher Waller as potential candidates for Fed leadership.