Federal Reserve Governor Stephen Myin on Interest Rates, Inflation, and Kevin Warsh

Transition and Confirmation Process

• 📌 Governor Stephen Myin's term is ending, but he will remain at the Fed until his replacement is confirmed, a common practice.
• ⏳ There is uncertainty regarding the timeline for confirming Chairman Designate Kevin Warsh, with potential Senate blocking tactics mentioned.

Stance on Interest Rates and Inflation

• 📉 Myin still believes rates are too restrictive and advocates for substantial further rate cuts, though he now favors a slower pace of a quarter point per meeting.
• ⚠️ He reduced his dissent from 50 to 25 basis points due to progress in rate cuts and slightly better labor market data, but concerns about the labor market persist.
• 📊 Myin argues that much of the reported inflation overage is due to measurement quirks, specifically portfolio management services (inflated by stock market gains) and the lagged measurement of housing inflation.
• 🎯 He suggests that after adjusting for these factors, inflation is running around 2.2%, which is within noise of the Fed's target, and policy should not be based on measurement errors.

Labor Market and Economic Segments

• 🧩 Myin acknowledges discussions about a K-shaped economy affecting firms and households, but emphasizes the Fed's mandate to focus on the overall macroeconomy.
• 🔍 He believes that analyzing segments like younger workers or those with fewer degrees can serve as leading indicators for the overall labor market.
• 📈 Data indicating pockets of weakness, such as in small business segments, are valuable for understanding potential future trends in the broader economy.

Views on Kevin Warsh and Fed Leadership

• 👍 Myin expresses strong confidence in Kevin Warsh as a pick for Fed Chair, citing his long career, credibility, and respect within financial markets and among economists.
• 🤝 He believes Warsh will be able to build consensus within the FOMC due to his experience and respect.
• 🚫 Myin states the President has never asked him to take specific actions on monetary policy, and he was not privy to Warsh's discussions with the President.
• ✅ He asserts that the public's confidence should be based on policy actions consistent with economic data, rather than the perceived motives behind them.

Balance Sheet Policy and Future Outlook

• 🏦 Myin supports shrinking the Fed's balance sheet but believes regulatory reform is necessary to manage reserve demand from banks.
• ⚖️ He suggests that if shrinking the balance sheet leads to higher long-term rates, the Fed can offset this by adjusting short-term rates, as long as it's not at the zero lower bound.
• 🙏 Myin thanks Chairman Powell for his work during the pandemic recession, acknowledging its critical role in preventing a deeper economic crisis.