Stephen Miran

I gave a speech about this about a month ago in December at Columbia University.

My view is that almost all of the excess inflation over target is due to quirks of how we calculate inflation.

So as you have talked about with many of your guests many times before, shelter inflation really, really lags a lot.

And because average tenant rents have caught up to new tenant rents, because market rents have been running at a 1% rate for a couple of years now, I think it's appropriate to sort of think about underlying inflation as abstracting from that a little bit.

You know, the shelter inflation is indicative of a supply-demand imbalance from 2022, 2023, not 2027.

We need to be making policy for 2027 because policy lags.

And the other side of it is the portfolio management fees that I'm sure you've talked about again with many of your guests many times.

Stock market went up.

Mechanically, inflation moves higher, despite many of your other guests, I'm sure, no doubt, telling you about fee compression in the asset management industry for decades.

So you abstract from those two things.

Underlying inflation is running at 2.3%.

That's what's the noise of our target.

Yes, so a couple things.

First of all, as I just said, underlying inflation is running within noise of our target, and that's a good indication of where overall inflation is going to be going in the medium term.

But then the unemployment rate is 4.6%, right?

So that means that there's about a million Americans who don't have jobs who could have jobs without causing unwanted inflation, without causing unwanted upward pressure and inflation.

I don't think it's right to tell those people that they shouldn't have jobs because we're just mechanically calculating inflation in some silly way.

I just don't think that makes a lot of sense.

The other thing is that because we've kept policy tighter than I think it ought to be, that makes me mark down our growth forecast for the future relative to where it should be.

And so if we hadn't been keeping policy, in my view, too tight over the last year or so, it wouldn't be necessary to provide that type of accommodation.