Federal Reserve Board Member Miran: Geopolitical shocks are not yet sufficient to alter the expectation of four rate cuts this year

Question for AI · Why does Miran insist on interest rate cuts under geopolitical shocks?

Federal Reserve Governor Stephen Miran stated that the fluctuations in oil prices caused by the US-Israel war are not enough to shake his baseline expectation of four interest rate cuts this year, and the Fed should wait for more information to solidify before adjusting its policy outlook.

In an interview with Bloomberg on Monday, Miran said, “We should wait for all the information to come in before making a real change to our outlook,” and noted that “it is still too early to form a clear judgment for the next 12 months.” The path of four interest rate cuts set before the conflict remains unchanged.

The Middle East conflict has significantly pushed oil prices higher, raising concerns that this will simultaneously exert upward pressure on inflation and drag on economic growth and the labor market. The Fed maintained the benchmark interest rate unchanged for the second consecutive week, with Chairman Powell emphasizing that officials need to see more progress on inflation. Miran cast a dissenting vote on this decision, advocating for a 25 basis point rate cut.

Although Miran acknowledged that if oil prices remain high, they could eventually transmit to broader prices of goods and services, his current statement indicates that short-term geopolitical shocks have not yet prompted him to reassess the easing path for this year.

Fed Holds Steady, Miran Casts Dissenting Vote

The Fed held steady for the second consecutive time at last week’s policy meeting, with decision-makers citing the heightened economic uncertainty brought about by the US-Israel war as the reason for maintaining interest rates. Powell emphasized after the meeting that officials need to see inflation cool further before paving the way for a rate cut.

Miran cast a dissenting vote at this meeting, advocating for a 25 basis point rate cut. This stance is consistent with his overall dovish position—while most members chose to wait and see, he leans towards advancing easing policies sooner.

Oil Price Shock and Inflation Spillover Risks

The sharp rise in oil prices triggered by the Middle East conflict has reignited market concerns about the inflation outlook. Miran acknowledged that if oil prices remain high for an extended period, there is indeed a risk of spillover to other goods and services prices, creating broader inflationary pressure.

However, he currently categorizes this scenario as a potential risk rather than a baseline forecast. In his view, adjusting the policy path hastily amid high geopolitical uncertainty does not align with prudent decision-making principles; the Fed should remain patient and reassess once the situation becomes clearer.