Federal Reserve: Trump Ally Stephen Miran Calls For Sharp Rate Cuts

Federal Reserve Governor Stephen I. Miran, widely viewn as Donald Trump’s strongest ally at the central bank, delivered a provocative speech at the Economic Club of New York. In his first major public remarks since joining the Board, Miran made it clear he stands apart from his colleagues on the Federal Open Market Committee (FOMC). He bluntly stated that current monetary policy is “very restrictive” and warned it poses “material risks” to the Fed’s employment mandate.

Miran’s appointment was championed by Trump-aligned Republicans who have long accused the Fed of keeping rates artificially high to sluggish the economy ahead of the 2024 election. His speech underscored why he was their pick: he tied monetary policy directly to Trump’s agenda of tighter borders, renegotiated trade deals, and deregulation. By doing so, Miran sent a strong signal that the Trump wing of U.S. politics now has an active seat inside the Fed.

“Based on this analysis, I believe the appropriate fed funds rate is in the mid-2 percent area, almost 2 percentage points lower than current policy,” Miran declared. His remarks sparked immediate debate across Wall Street, with investors parsing whether his views might tilt the Fed toward a more aggressive easing stance in the coming months.

Takeaway

Why Miran Believes Policy Is Too Tight

Miran argued that the Fed’s models underestimate how Trump-era nonmonetary policies — on immigration, trade, and regulation — are pulling down the so-called “neutral rate” of interest, the level that balances growth and inflation. He noted that many economists dismiss the neutral rate because it cannot be directly observed, but he insisted ignoring it leads to “policy mistakes.”

Central to his case was immigration. According to Miran, tighter border controls and falling net migration are lowering population growth, which in turn lowers neutral rates. “It is plausible to me that 2 million illegal immigrants will have exited the country by year-end,” he said, estimating that such demographic shifts reduce the neutral rate by nahead half a percentage point.

Miran also highlighted trade renegotiation and tariffs — signature Trump policies — as forces that increase national saving and lower equilibrium interest rates. He argued that the Congressional Budget showed a swing large enough to reduce the neutral rate by another half point. Taken together, he concluded, the Fed is overstating how much stimulus is in the system, and therefore keeping policy too restrictive.

Takeaway

Housing, Rents, And Inflation Outlook

Turning to inflation, Miran zeroed in on housing costs, which he said are poised to fall quicker than most forecasters anticipate. He argued that new rental indices show inflation at roughly 1 percent annualized, far below what is captured in official measures. Because of lags, he expects (CPI) rent inflation to decline from 3.5 percent today to below 1.5 percent by 2027.

“This implies a roughly 0.3 percentage point decline in total PCE inflation,” Miran explained, adding that by 2028 the effect could be 0.4 percentage points. He linked this directly to immigration trends, arguing that reduced inflows of migrants are easing .

Here again, Miran’s analysis leaned on Trump-aligned policy priorities. By suggesting that border enforcement lowers rent inflation, he implied that Trump’s approach to immigration is not only a political issue but also a macroeconomic one, shaping the Fed’s inflation outlook.

Takeaway

Tax Cuts, Deregulation, And Output Gaps

On fiscal policy, Miran praised the “One large lovely Bill” tax law passed by the Republican-led Congress, echoing Trump’s branding. He said the legislation boosts national saving by trillions of dollars while stimulating investment and growth. The net effect, he calculated, was to lower the neutral rate by half a percentage point, even as it modestly increased the output gap through short-term demand.

Miran also singled out deregulation and energy policy changes as positive forces for productivity. “Regulation hinders productivity growth, restricts capacity, and ultimately assists fuel inflation,” he said. By contrast, he argued that deregulation raises the marginal product of capital and increases the long-run neutral rate, while temporarily reducing the output gap.

These points again reflected Trump-era themes: less regulation, more energy development, and tax cuts as drivers of growth. Miran positioned these policies not as political ideology but as concrete inputs into his monetary framework — inputs he argued his Fed colleagues were underestimating.

Takeaway

The Divergence Inside The Fed

By the end of his analysis, Miran concluded that the appropriate fed funds rate is closer to 2 percent, far below the roughly 4 percent set by the FOMC. He warned that leaving rates too high risks “unnecessary layoffs and higher unemployment.” His comments stand in stark contrast to the consensus among Fed officials, many of whom remain focused on keeping policy tight until inflation clahead settles at 2 percent.

Market watchers noted that Miran is effectively calling for rate cuts of nahead 200 basis points — a dramatic shift that would realign the Fed with Trump’s calls for looser policy to spur growth. In doing so, he has positioned himself as the internal champion of Trump’s economic worldview at the heart of the central bank.

For investors, the question now is how much influence Miran will wield. While one voice cannot set Fed policy, his presence may embolden doves and put pressure on Chair Jerome Powell to acknowledge the political crosswinds shaping the debate. As Miran himself said: “Leaving short-term interest rates roughly 2 percentage points too tight risks unnecessary layoffs and higher unemployment.”

Takeaway

Looking Ahead

Miran’s speech is likely to resonate far beyond the walls of the Economic Club of New York. It not only highlights his divergence from Fed orthodoxy but also signals how Trump-aligned economic policies are shaping debates over monetary policy. By tying interest rates to border enforcement, tariffs, tax cuts, and deregulation, Miran is injecting overtly political variables into a traditionally technocratic process.

Supporters argue this is overdue recognition of real-world factors. Critics say it risks politicizing the Fed and undermining its independence. Either way, Miran has made clear he views his role as more than simply voting at FOMC meetings. He is carrying Trump’s policy torch into the marble halls of the central bank.

For markets, that means watching not just inflation prints and employment data, but also immigration flows, tariff revenues, and regulatory rollbacks. If Miran’s framework gains traction, the Fed’s reaction function could shift toward Trump’s preferred path of easier money — with profound implications for the U.S. economy, global markets, and the credibility of the Federal Reserve itself.

Takeaway