U.S. Federal Reserve Governor Stephen Miran is pushing for a substantial 0.5% interest rate cut in December, emphasizing the need for rapid monetary easing to preempt an economic slowdown and clashing with the central bank’s more cautious approach.
Miran argued in a CNBC interview that the U.S. economy “needs faster relief” and warned that current monetary policy is moving “too slowly,” risking the Fed falling behind economic developments. He suggested that “at a minimum,” a 0.25% cut would be appropriate.
This marks the third time Miran has advocated for a 0.5% reduction. He previously proposed the same measure during the Federal Open Market Committee (FOMC) meetings in September and October, voting against the committee’s decisions to implement smaller 0.25% cuts.
The internal divisions within the Fed on monetary policy are becoming increasingly apparent. In October, Jeffrey Schmid, President of the Kansas City Fed, also voted against the FOMC’s decision, but for the opposite reason: he opposed any rate reduction.
Fed Chair Jerome Powell recently acknowledged these “clear differences” among central bank officials. He stated that a December rate cut is “not guaranteed,” noting that some members seek more conclusive evidence that inflation, which remains above the 2% target, is declining sustainably.
Miran contends that focusing solely on current economic data is a mistake. He explained that monetary policy adjustments typically take 12 to 18 months to fully impact the economy.
He cautioned that “waiting too long can mean tightening at the worst possible time,” advocating for proactive measures to avoid excessive tightening in the future.
Miran highlighted that available data points to “softer inflation” and a “weakening labor market.” He believes these indicators justify a more flexible monetary stance than the three rate cuts the Fed projected for the year in September.
Access to updated economic information has been complicated by the recent U.S. government shutdown, making the FOMC’s evaluations more challenging.
Financial markets reflect this uncertainty. CME Group’s FedWatch tool shows investors assigning a 63% probability to a December rate cut, though this estimate has decreased since the October meeting, indicating less perceived willingness from the Fed to act swiftly.
Separately, the U.S. Congress continues to address a prolonged government funding dispute. The Senate has approved the initial phase of an agreement to reopen federal agencies, with the House of Representatives expected to vote on the final version this week before it is sent to the president for signature.