Lone Voice at the Fed: Stephen Miran’s Aggressive Call for Rate Cuts

Federal Reserve Governor Stephen Miran delivered a striking, outlier view on Tuesday, arguing emphatically that U.S. monetary policy is dangerously restrictive and that the central bank must aggressively cut interest rates. His core argument rests on two highly controversial premises: an ultralow estimate for the neutral interest rate (r-star) and the belief that inflation pressures are almost exclusively tied to immigration.

The Unprecedented r-star Estimate: Why Policy is Too Tight

Miran’s most significant departure from his colleagues is his personal calculation of the neutral rate of interest (r-star)—the rate that neither speeds up nor slows down the economy—at just 0.5 percent.

The Problem: Miran points out that this 0.5 percent estimate is well below the consensus range, which typically starts at 0.8 percent to 1.0 percent at the low end. If his estimate is correct, the Fed’s current benchmark rate is far more restrictive than most economists believe, and he warned this poses “material risks” to the employment mandate if the policy isn’t adjusted quickly.

The Prescription: Because policy is already so tight, Miran believes the Fed should be forward-looking, arguing that relying solely on past data is a mistake due to the long lag time for policy to take effect. He also cited the bond market’s reaction as evidence supporting a push for rapid rate reductions. He maintained that even if the economy performs well, it “doesn’t have firm implications for monetary policy” if the policy rate remains too high relative to the low r-star.

Inflation’s Single Driver: Immigration Controls

Miran maintained his unique perspective on price increases, stating that any underlying inflation pressures are “entirely contained within migrant population effects” and will be solved mainly by immigration controls.

Optimistic Inflation View: Miran is notably “more sanguine on inflation outlook than many others,” expecting shelter inflation (rent) to ease significantly. This moderation, driven by changes in immigration, gives him “comfort that price pressures will ease.”

Tariffs Dismissed: He downplayed other common factors, specifically stating he doesn’t see tariffs as a “material driver of inflation.”

Economic Outlook and Data Integrity

Beyond the rate debate, Miran offered several key observations on the economic landscape: He noted that the uncertainty that held back growth in the first half of the year has “lifted,” leading to reasons for optimism going forward.

Miran highlighted concerns over declining response rates in surveys, calling it a “significant problem,” and maintained that private data is not a sufficient replacement for government data.

He concluded that he does not see a need to change the Fed’s inflation target and, in normal circumstances, the Fed should not actively target long-term rates.