Federal Reserve Governor Milan finds a new reason for continued interest rate cuts: Deregulation by the Trump administration

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Stephen Miran, a Federal Reserve Governor “handpicked” by U.S. President Trump for his second term, has found a new argument for his aggressive rate cut policy. He believes that the Trump administration’s sweeping deregulatory agenda will significantly boost productivity and potential growth, which is why the Fed should also continue to cut interest rates.

On Wednesday, January 14th, U.S. Eastern time, Miran said at an event in Athens, Greece that, according to the Trump administration’s pace of deregulation at the start of 2025, 30% of federal regulatory restrictions would be removed by 2030. He believes this would be "a substantial positive shock to productivity, putting downward pressure on prices,” thus “supporting a more accommodative monetary policy stance.”

His Wednesday speech means that, following previous arguments such as the expected cooling of housing inflation and low neutral interest estimates, deregulation has become Miran’s new reason for supporting aggressive rate cuts. Commentators noted that Miran’s policy stance aligns closely with Trump’s calls for substantial rate cuts by the Federal Reserve.

Last September, Miran, originally a White House economic adviser, took unpaid leave to assume the role of Fed Governor before that month’s FOMC meeting. Since then, in the three FOMC meetings he participated in, he voted against the decision to cut rates by 25 basis points each time, as he has always advocated for a single cut of 50 basis points rather than the conventional 25, making him one of the few ultra-dovish members among the Fed’s leadership.

Deregulation becomes a new argument for rate cuts

This Wednesday, Miran stated that the ongoing comprehensive deregulation "will significantly enhance competition, productivity, and potential growth, allowing the economy to grow faster without generating upward inflationary pressure.”

At the Athens economic forum, Miran elaborated on how deregulation creates space for more accommodative monetary policy. He pointed out that “regulation impedes production, while deregulation removes these barriers,” and that a greater supply of goods and services can curb price increases.

Miran said:

“Overall, I believe that the large-scale deregulation measures since 2025 will continue for at least the next three years, and this will have a hugely positive effect on productivity, thereby putting downward pressure on prices. All in all, this supports adopting a more accommodative monetary policy stance.”

He warned, “Ignoring these effects will lead to unnecessarily tight monetary policy.”

This is another detailed and academic speech Miran has given since last September. Previously, he had put forward arguments such as the broad adoption of stablecoins, slowing population growth, falling housing inflation, and budget deficit improvement driven by tariffs, all pointing towards the Fed adopting a more accommodative policy stance.

Calls for 150 basis points of rate cuts in 2026

Wallstreetcn article mentioned that Miran said in an interview last week that he hopes the Fed will cut rates by a total of about 150 basis points in 2026 to support labor market recovery. He believes the current interest rate is “significantly higher than the neutral level,” and monetary policy still remains clearly restrictive.

Miran stated: “I’m looking for about 150 basis points of cuts, which is largely based on my assessment of inflation. Underlying inflation is basically within the noise range of our target.” He estimates core inflation at about 2.3%.

Miran also noted that about one million Americans could rejoin the workforce without triggering unnecessary inflation. He said his direction after his term ends this month is still unclear, but he "wouldn’t mind staying on." In the last few months of last year, the Fed made three consecutive rate cuts, totaling 75 basis points, but signaled it may pause cuts at the next meeting on January 27-28.

Policymakers are divided on the outlook for inflation and employment. Some officials are more concerned about signs of labor market weakness and support further rate cuts; others advocate caution, citing inflation still hovering above the Fed’s 2% target.

The dot plot released last month showed that most Fed officials expect the Fed to cut rates by only 25 basis points in 2026, while investors currently expect at least two cuts over the year. Miran’s 150 basis point cut forecast far exceeds the consensus among his Fed colleagues, highlighting his clear divergence on monetary policy from most other Fed officials, as a Governor appointed by Trump.

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