Federal Reserve Governor Stephen Miran said on Monday that the Fed should cut interest rates to help the economy. According to him, a 50 basis point cut is appropriate for December, but he said the Fed should at least lower rates by 25 points.
Miran spoke during a CNBC interview, warning that relying only on current data is backward-looking because policy effects take over a year to impact the economy. He said, “Nothing is certain. We could get data that would make me change my mind between now and then.”
Meanwhile, Miran has voted against the last two Fed meetings that lowered rates by 25 points. He wants a faster pace because he sees signs of softening in inflation and the labor market. He said policymakers should focus on the economy’s future, not just today.
Currently, markets expect about a 62 percent chance that the Fed will reduce rates in December, according to CME Group’s FedWatch tool. At the same time, other Fed officials have different views.
San Francisco Fed President Mary Daly said the Fed should stay open to all options. She explained that prices are slowly falling but still higher than they should be, and jobs are not as strong as before. Fed Governor Chris Waller agreed more cuts may help but said the current pace is fine for now.
Earlier this year, the Fed has already cut rates twice, in September and October, both by 25 points. Miran has been the only member who wanted a 50-point cut each time. Kansas City Fed President Jeffrey Schmid voted no in October because he wanted no cuts.
Fed Chair Jerome Powell said at the October meeting that another cut is not guaranteed and officials are divided. Miran said failing to ease rates now would be short-sighted. He added, “If you’re making policy for what the data are now, you are backward looking.”
That said, officials are working with limited economic data due to the U.S. government shutdown. Miran said the available data has shown softening in both inflation and the labor market. Therefore, investors and markets are now watching closely to see how the Fed will act at the December 10 meeting.
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