Federal Reserve governor Stephen Miran said the U.S. economy is “calling for large interest rate cuts” and warned that current monetary policy is “holding the economy back” by keeping borrowing costs too high and pushing the unemployment rate upward.
“I think the economy calls for large interest rate cuts to get monetary policy to neutral as quickly as we can. Monetary policy is exerting restriction on the economy. It’s holding the economy back. It’s pushing the unemployment rate gradually upward,” Miran said on “Mornings with Maria” Tuesday.
“And I don’t think that’s appropriate given the economic outlook,” he continued. “So I think it’s the right thing to cut interest rates rather quickly.”
Policymakers on the Federal Open Market Committee (FOMC) were divided at their late October meeting over whether there should be an additional rate cut at their next meeting in mid-December amid concerns about a softening labor market and persistent inflation.
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The Fed cut rates for the first time this year in September and followed that up with a second 25-basis-point cut in October, leaving the benchmark federal funds rate in a range of 3.75% to 4%.
Miran advocated for a series of 50 basis point cuts and an overall dovish stance moving forward, pointing to recent jobs numbers and low inflationary risks.
“I think what you’ll see on the rest of the committee is that the labor market data that we got recently, I hope, will move people in my direction of thinking it’s appropriate to continue cutting interest rates. I think that’s what the data called for,” he said, referencing the better-than-expected September jobs report.
“A lot of people, if you look at where their projections for the economy go, and what we call ‘the dots,’ they have us getting towards neutral rates. It’s just over the question of how quickly we get there. And I want to get there rather quickly because I don’t see an inflation problem,” Miran explained.
“In my mind, almost all of the inflation excess is a mirage. It’s due to supply and demand imbalances in the housing market… and because the monetary policy lags.”
However, current monetary policy still puts pressure on America’s workforce.
“We have to recognize that the unemployment rate has been drifting higher, and that is a function of monetary policy being too tight,” Miran noted.
“Now, my concern is that if we don’t continue cutting rates and do so at a reasonably quick pace, that monetary policy will nip all those positive developments in the bud, and we will not get the recovery in the labor market that I think is appropriate.”
The Fed governor also agreed with anchor Maria Bartiromo that widespread relief is needed across America’s real estate markets and encouraged his central bank colleagues to “be forward-looking and make policy on a forward-looking basis.”
“We need relief in mortgage rates,” Miran said. “Some people argue financial conditions are very loose because of the stock market, but housing is what really matters for the transmission of financial conditions into the economy. And financial conditions in mortgages and housing markets are still very tight. I do believe those will come down as we cut interest rates.”
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FOX Business’ Eric Revell contributed to this report.
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