Federal Reserve Board member Miran: Geopolitical shocks are not yet sufficient to change the forecast of four interest rate cuts this year.

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Federal Reserve Board member Stephen Miran stated that the oil price volatility caused by the US-Israel war against Iran is not yet sufficient to shake his baseline expectation of four rate cuts within the year; the Fed should wait for more information to settle before adjusting its policy outlook.

In an interview with Bloomberg on Monday, Miran said, "Before we truly change our outlook, we should wait for all information to come in," and noted, "Looking ahead to the next 12 months, it is still too early to make a clear judgment now." His path of four rate cuts this year, set before the war, remains unchanged.

The conflict in the Middle East has driven oil prices significantly higher, raising concerns that this will simultaneously exert upward pressure on inflation and drag down economic growth and the labor market. Last week, the Federal Reserve kept its benchmark interest rate unchanged for the second consecutive time. Chair Powell emphasized that officials need to see more progress on inflation. Miran cast a dissenting vote on that decision, advocating for a 25 basis point rate cut.

Although Miran acknowledges that if oil prices remain high, they could eventually spill over into broader commodity and service prices, his current stance indicates that short-term geopolitical shocks are not yet enough to prompt him to reassess the path of easing within the year.

Fed Holds Steady, Miran Casts Dissenting Vote

At last week's policy meeting, the Fed kept rates unchanged for the second consecutive time, citing the heightened economic uncertainty brought by the US-Israel war against Iran as the rationale for maintaining rates. After the meeting, Powell emphasized that officials need to see further cooling of inflation to clear the way for rate cuts.

Miran cast a dissenting vote at this meeting, advocating for a 25 basis point rate cut. This stance is in line with his overall dovish position—while most committee members prefer to wait and see, he favors moving forward with easing policies ahead of time.

Oil Price Shocks and Inflation Spillover Risks

The sharp rise in oil prices caused by the Middle East conflict has reignited market concerns about the inflation outlook. Miran acknowledges that if oil prices remain high for an extended period, there is indeed a risk of spillover into other goods and service prices, creating broader inflationary pressures.

However, he currently considers this scenario a potential risk, not his baseline forecast. In his view, it is not prudent to rashly adjust policy paths amid high geopolitical uncertainty; the Fed should remain patient and wait until the situation becomes clearer before making its judgment.

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