Federal Reserve Governor Milan: Trade uncertainty makes rate cuts more urgent

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Federal Reserve Board member Stephen Miran recently stated that the recent trade tensions have increased the uncertainty of economic growth prospects, making it more necessary for policymakers to cut interest rates as soon as possible.

At an event hosted by CNBC on Wednesday, Miran said: “Downside risks are now greater than they were a week ago. I believe as policymakers, we have a responsibility to recognize this and let policy reflect this change.” He noted that uncertainty in trade policy has brought a “new tail risk.”

Miran said: “I wouldn't say I want to cut even more now than a week or a month ago; but as the risk balance shifts, I think we need to more urgently move policy back to a more neutral level.”

Miran previously said that he supports lowering the Fed's benchmark interest rate by another 1.25 percentage points by the end of this year. According to the latest median forecast from the Fed's 19 policymakers, there will be two more 25 basis point rate cuts in 2025. Miran said on Wednesday that two more cuts this year “sounds realistic.”

On Tuesday, Fed Chair Jerome Powell reinforced market expectations that there will be a second consecutive 25 basis point rate cut at the FOMC meeting later this October. Although inflation remains above the Fed’s 2% target, concerns about slowing job growth and increased unemployment risk may be the main factors driving this decision.

Miran expects substantial disinflation in the coming year.

Miran has repeatedly called for more accommodative monetary policy. Last month, he opposed the decision to cut rates by only 25 basis points, advocating instead for a 50 basis point cut.

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