Fed Gov. Stephen Miran Calls for Dramatically Lower Interest Rate After Voting for Jumbo Cut

Stephen Miran has spoken publicly for the first time since President Donald Trump appointed him to the Federal Reserve Board of Governors, calling for dramatic cuts to the central bank's interest rate.

In comments to the Economic Club of New York on Monday, Miran diverged starkly from Fed Chair Jerome Powell and argued that the policy rate should be in the mid-2% range, nearly two percentage points lower than the current range of 4% to 4.25%.

Last week, the rate-setting Federal Open Market Committee (FOMC) voted 11-1 to cut rates by a quarter point, marking the first reduction since 2024. Miran was the lone dissenter, instead voting for a larger half-point rate cut.

In his remarks, Miran acknowledged that his view on monetary policy "diverges from those of other FOMC members" but argued that the Fed's current approach to rates could cause rising layoffs and unemployment.

"I view policy as very restrictive, believe it poses material risks to the Fed's employment mandate, and would like to explain why," he said. "I believe the appropriate fed funds rate is in the mid-2% area."

The Fed uses higher interest rates to combat inflation, and lower rates to stimulate the labor market. While the Fed doesn't set mortgage rates directly, long-term expectations about inflation and Fed policy do influence the markets that set those mortgage rates.

Miran in his comments argued that key factors, including Trump's immigration and trade policies, have changed the calculus for the Fed's "neutral rate," which is the rate that neither encourages spending and investment, nor restricts the economy to tame inflation.

"The upshot is that monetary policy is well into restrictive territory," said Miran. "Leaving short-term interest rates roughly 2 percentage points too tight risks unnecessary layoffs and higher unemployment."

Miran cites Trump's immigration, trade policies to call for lower rate

In Miran's view, Trump's border restrictions and deportation policies will have a significant impact on population growth, easing pressure on housing prices and naturally slowing expansion in the labor market.

"The U.S. population has grown by around 1% annually in recent years, driven in large part by illegal immigration," said Miran. "Assuming some overcounting, it is plausible to me that 2 million illegal immigrants will have exited the country by year-end, thereby reducing annual population growth from 1% to 0.4%."

Slower population growth typically means slower economic growth, reducing the risk of inflation and making lower interest rates more feasible.

Miran also said he believes that experts have underestimated the impact of large-scale immigration on housing cost inflation, and expects overall inflation for rents to fall below 1.5% by 2027.

"One might characterize this view on rental inflation as optimistic," he said. "However, I believe forecasters have underappreciated the significant impact of immigration policy on rent inflation—both on the way up and, now, on the way down."

While other Fed policymakers have cited the potential inflationary impact of Trump's tariffs as cause to keep policy in restrictive territory, Miran argues that the overall impact of tariffs calls for lowering rates.

"The Congressional Budget Office estimates tariff revenue could reduce the federal budget deficit by over $380 billion per year over the coming decade," he said. "This is a significant swing in the supply–demand balance for loanable funds, as national borrowing declines by a comparable amount."

Miran insists he remains independent of political influence

Following his nomination by Trump, Miran took a leave of absence from his job as a White House economic adviser, but technically remains an employee of the president—the first such to ever sit on the Fed's Board of Governors.

His appointment raised questions about Fed independence. Historically, central bank independence is important because artificially lowering interest rates for political purposes tends to spur runaway inflation and capital flight, ultimately driving up borrowing costs including mortgage rates.

Since beginning his second term, Trump has called vociferously for the Fed to cut rates, publicly attacking his own appointee Powell and at various points threatening to fire or sue the Fed chair.

But in a fireside chat following his speech, Miran said that Trump had never directed him to set a particular rate policy, and insisted that any decisions he made about monetary policy would be based on his own analysis of economic conditions.

"I will do the best at it that I possibly can. That means pouring my own views independently, based on what I think is appropriate economics, based on what I think is appropriate analysis," he said. "I want to be so transparent, and as transparent as I possibly can be."

Asked what he would do if the president called him to ask him to pursue a specific policy at the Fed, Miran responded: "I would respectfully listen to his view. I would consider his arguments, consider whether they had any merit, and then I would make up my own mind based on my own analysis."

Miran joined last week's FOMC meeting within hours of being sworn in and after a narrow Senate confirmation vote dogged by questions about his independence.

However, he said that he was graciously received by other Fed policymakers at the meeting despite the political drama surrounding his appointment.

"It was friendly, it was respectful, and I was very appreciative of that," he said. "There was a forthright exchange of views. And you know, lots of diversity of views. And I appreciated that conversation."

The Fed's "dot plot" of policy expectations underscored the huge range of opinions on the FOMC. One hawkish FOMC member predicted a rate hike before the end of the year, and one extreme dove calls for the equivalent of five quarter-point rate cuts over the next two meetings.

Miran on Monday confirmed the widespread suspicion that he was the ultradove who wants to rapidly cut rates, saying that he wanted the Fed to cut rates by 50 basis points over three meetings this year.

In his remarks, Miran stuck by his views and said he would continue to dissent with the FOMC majority in future meetings if his views diverged with the rest of the panel.

"I'm not going to vote for something I don't believe in, just for the sake of creating an illusion of consensus where there is none,” he said.

In a press conference last week, Powell said that there "wasn't widespread support at all" for a 50 basis-point cut at the recent meeting.

"Really the only way for any voter to really move things around is to be incredibly persuasive, and the only way to do that in the context in which we work is to make really strong arguments based on the data and your own understanding of the economy," said Powell. "That's really all that matters."