Fed's Miran believes Fed interest rate is 200 basis points too high

Newly-minted Federal Reserve (Fed) Board of Governors members Stephen Miran hit the wires on Monday, declaring his personal belief that Fed interest rates are far too high, and far too restrictive.

Counter-intuitively, Miran also declared himself dedicated to achieving inflation targets. How Miran intends to cut interest rates, bolster employment, and tamp down inflation all at the same time remains unexplained.

Treasury yields and mortgage rates both climbed following last week's Fed interest rate cut, implying there may be a structural mismatch between the natural rate of interest and Miran's expectations.

Key highlights

Fed policy is "very restrictive" and poses risk to Fed's employment mandate.
Taylor-type rules are usefdul to gauge where Fed funds rate should be but I am not "slavishly devoted" to them.
I believe appropriate Fed funds rate is in mid-2% area, almost 2 percentage points below current level.
Committed to bringing inflation back to 2%.
Expect rent inflation to fall from 3.5% now to 1.5% in 2027.
Forecasts have underappreciated impact of immigration policy on rent inflation.
Net zero immigration would imply one percentage point lower rent inflation per year.
Immigration policy driven reduction in population growth rate also exerts downward pressure on neutral rate.
Relatively small changes in some goods prices have led to unreasonable levels of concern.
I believe tariffs will lead to substantial swing in net national savings.
Loan and loan guarantees from East Asian nations increase credit supply, lower neutral rate by 0.2 percentage points.
I look forward to working more with board staff and their forecasts in the coming months.
Existing backward-looking estimates or r-star (the natural rate of interest) are too high, insufficiently account for recent changes to fiscal and border policies.
Monetary policy is well into restrictive territory.
Leaving short-term interest rates roughly 2 percentage points too tight risks unnecessary layoffs and higher unemployment.

Policy is considerably restrictive and a threat to economic momentum.
It's better to move to neutral quickly, but is not panicked about the state of policy.
A series of 50 bps cuts will recalibrate policy.
After steep cuts, I see a little more cutting in 2026 and 2027.
Unless something changes, I will continue to press for rate cuts. I'm willing to dissent again.
Fed balance sheet is swollen on unneeded asset buying.