Federal Reserve Governor Stephen Miran Talks Rate Cuts, Inflation, Future at Fed
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What is the main topic discussed in this episode?
Bloomberg Audio Studios Podcasts, radio, news.
What direction are investors seeking from the Federal Reserve?
We begin this out with investors searching for direction in a pivotal year potentially for the Federal Reserve. Fed Governor Stephen Myron doubling down on his dovish stance, calling for the central bank to cut interest rates by more than a percentage point in 2026. Governor Myron joins us now for more. Governor, good morning and Happy New Year. Happy New Year. Thanks for having me back. It's good to see you. You've been very, very transparent about where you are on the dot plot and what your forecast is. So let's start there. Where are you for this year? Where's your dot?
What is Stephen Miran's stance on interest rate cuts?
What are you looking for?
Yeah, so I'm unsurprisingly the lowest dot. I'm looking for about a point and a half of cuts. A lot of that is driven by my view of inflation. 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.
That sounds like an argument for neutral. You're making an argument, though, for this year, for accommodation. Where does that come from? Why are you looking for accommodative monetary policy stance coming out of Washington?
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.
How does Miran view inflation and its impact on policy?
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.
Just quickly, you say mark down in the future. Yeah. because the Fed actually marked up GDP for 26. Where do you mean in the future?
No, so like when you look at these dots, right, in the SEP, they're projections of appropriate policy and projections of economic fundamentals like growth and inflation, conditional upon growth. appropriate policy. So my projections for growth and inflation are conditional upon getting my policy forecast, my policy projection. If I don't get my policy projection because the rest of the committee is more hawkish than I am, then we wouldn't meet my growth and inflation projections. We'd underperform them. And so because policy has been, in my view, too tight for the last year, that means that my expectations of growth will ultimately be unsatisfied because we didn't get the policy that I wanted.
You have GDP 2.6% roughly over the next few years.
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Chapters
7 chapters
1
What is the main topic discussed in this episode?
0:02–0:07
2
What direction are investors seeking from the Federal Reserve?
0:07–0:32
3
What is Stephen Miran's stance on interest rate cuts?
0:32–2:02
4
How does Miran view inflation and its impact on policy?
2:02–3:32
5
What underlying factors influence Miran's inflation outlook?
3:32–6:39
6
Why does Miran advocate for an accommodative monetary policy?
6:39–11:09
7
What projections does Miran have for GDP growth?
11:09–11:41
Speakers
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