Miran Warns Fed Rates 2% Too High; Defends Dissent in New York Speech

The Fed delivered a widely expected 25 basis point cut on 17 Sept, lowering the federal funds rate to a target range of 4.00%–4.25%. The decision passed on an 11–1 vote, with the lone dissent coming from Stephen Miran, the Fed’s newest governor and a Trump appointee. In his debut meeting, Miran argued for a larger half-point cut, a striking move that immediately drew scrutiny over the central bank’s independence in an election year.

Fed officials signaled that further easing is likely before year-end, but Chair Jerome Powell urged caution, noting inflation remains above the 2% target. Miran’s more dovish stance highlighted a growing divide inside the central bank over how quickly to respond amid a weakening outlook for jobs.

Economic backdrop

The Fed’s cut came against a mixed backdrop. Real GDP rebounded at a 3.3% annualized pace in the second quarter of the year after contracting 0.5% in Q1, reflecting resilient consumer spending and inventory adjustments, but fragile momentum amid tighter credit and renewed tariff uncertainty.

Labour figures are more concerning. A BLS benchmark revision showed the US created 911,000 fewer jobs in the 12 months through March than initially reported, underscoring underlying weakness. Job gains are slowing and unemployment has drifted up to 4.3%, challenging the Fed’s soft-landing narrative about the health of the economy.

Inflation remains sticky. While headline measures have eased, core PCE inflation held at 2.9% in July, signaling persistent underlying pressures. Powell described the September cut as “risk management” in both directions — aiming to support growth while avoiding premature easing. Miran reads the balance differently, arguing that President Trump’s worldwide trade tariff assault is not materially lifting inflation and that labour risks demand a faster return to a neutral interest rate near 3%.

Miran’s defence of dissent

In a 19 Sept CNBC interview, Miran defended his call for a 50 basis point cut, stressing that his stance was “data-driven” and reflected an independent reading of the risks. He described his projection of 2.75%–3.00% by year-end as a realistic return to neutral, even if it made him an outlier among colleagues.

Inside the Fed, reactions were muted. Governors Christopher Waller and Michelle Bowman backed Powell’s slower pace, while Minneapolis Fed chief Neel Kashkari called the meeting remarkable “for being unremarkable.” Yet Miran’s debut dissent ensured his voice could not be ignored.

Policy too tight

Speaking at the Economic Club of New York on Monday, Miran expanded on his reasoning. He argued that structural shifts, from tighter immigration and slower population growth to tariffs, tax changes and deregulation, have pushed the neutral rate lower into the low-to-mid-2% range. By his calculations, the appropriate fed funds rate should be 2%–2.5%, nearly two percentage points below the current setting.

“The upshot is that monetary policy is well into restrictive territory,” Miran warned. “Leaving short-term rates roughly 2 percentage points too tight risks unnecessary layoffs and higher unemployment.” He singled out cooling rent inflation, falling population growth, and deficit-reducing tariff revenue as factors pulling down the neutral rate, saying the Fed risks misjudging policy if it ignores these shifts.

Miran also made clear he will not soften his stance for unity’s sake: “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.”

Market and political implications

Markets reacted choppily. Equities and Treasury yields fluctuated as traders weighed whether Miran’s dissent marks a deeper shift inside the Fed or an isolated challenge. Fed funds futures, via the CME FedWatch Tool, now price a roughly 75% chance of rates falling to 3.50-3.75% by December, effectively a 50 basis point cut from current levels.

Politically, his stance adds pressure. Trump has urged the Fed to cut “big and fast” ahead of November’s election, and Miran’s ties to the White House Council of Economic Advisers — where he is “on leave” but has not quit — have revived concerns that central bank independence is under strain.

The force of the economics

Attention now turns to Powell’s upcoming remarks and the release of August core PCE inflation figures later this week, which will test whether Miran’s dovish reading resonates. If labour data confirm his warnings, his call for faster cuts may gain momentum; if not, he risks isolation on a Board still wary of inflation.

Closing his New York speech, Miran said his aim is to “lay out my economic arguments as clearly and transparently as I can, and hope to persuade some people by the force of the economics.” 

His unusually detailed analysis underscored a determination to keep dissenting, ensuring the Fed’s next moves will be judged not just on economics, but on what they reveal about the central bank’s independence.