FED’s Most Dovish Member Stephen Miran Makes Another Unusual Economic Statement

The re-escalation of trade tensions between the US and China poses new downside risks to the economic outlook.

Stating that this situation makes it even more important for the Fed to lower the policy rate, Fed member Stephen Miran argued in a statement today that the interest rate cut should be quickly brought down to a “neutral” level.

“No Need to Discount More Than 50 Basis Points at a Time”

Speaking at the CNBC “Invest in America Forum” event in Washington, Miran said, “There is now greater downside risk than before China imposed new restrictions on rare earth exports. As policymakers, we have an obligation to reflect this in monetary policy. It is now even more urgent that we quickly reach a more neutral policy position.”

China's announcement that it would restrict exports of rare earth elements, crucial for high-tech manufacturing, has put renewed pressure on global trade. In response, US President Donald Trump threatened to raise tariffs on Chinese imports to 100%. This move raised the possibility of a resurgence of the trade war, which threatened to shake global trade last spring but later receded.

Speaking at the same forum, US Treasury Secretary Scott Bessent stated that talks between the two countries were continuing.

Last month, the Fed lowered its policy rate by 25 basis points to a range of 3.75-4.00%. Markets are expecting another cut at its next meeting on October 28-29.

Recalling his previous meeting's advocacy for a larger 50 basis point cut, Miran reiterated his forecast for inflation to fall in the coming months. “I'm less concerned about upward inflation pressures in the near term,” he said, “which provides flexibility to cut interest rates more quickly.”

Miran also noted that there was no evidence in the data that the customs duty increased inflation, but rather that past trends showed the opposite. However, he added that if the expected decline in inflation in the housing sector fails to materialize, the economic outlook should be reassessed.