During the Nomura Research Forum at the International Monetary Fund (IMF) and World Bank Fall meetings in Washington, DC, Federal Reserve Governor Stephen Miran argued on Wednesday for more aggressive interest rate cuts to counter potential economic weakening.
In an interview with CNBC, Miran expressed that the Federal Reserve should accelerate its pace, favoring a 50 basis point reduction over the traditional quarter percentage point cuts. Despite consistent advocacy for larger cuts during recent Federal Open Market Committee (FOMC) meetings, he acknowledged the necessity for at least a quarter-point adjustment, stating, "Nothing is certain. We could receive data that could change my perspective between now and then. Yet, barring new forecasts, I believe a 50 basis point cut is appropriate, though at minimum, it should be 25."
Nevertheless, the FOMC opted for quarter-point cuts in both September and October, with Miran voting against these moves. A notable dissent also came from Kansas City Fed President Jeffrey Schmid in October, who opposed any cuts. Despite only two dissenting votes, public statements from various officials indicate diverse opinions among policymakers.
Fed Chair Jerome Powell acknowledged the differing views at a recent news conference, suggesting that a December rate cut is not guaranteed. Policymakers express mixed reactions: some hesitate due to inflation rates exceeding the 2% target, while others urge cuts to prevent labor market deterioration.
Miran criticized the reluctance for more ease, saying, "Making policy based solely on current data is backward looking, as it takes 12 to 18 months to impact the economy. Decisions should anticipate future economic conditions."
Policymakers are further challenged by limited economic data due to government lockdowns. Miran noted both inflation and labor market softening, suggesting the Fed should adopt a more dovish stance than its September forecast, which anticipated three total cuts this year.
As of now, market predictions maintain a 63% likelihood of another cut in December, though this has slowly declined since October, according to the CME Group's FedWatch.