Fed risks recession without more interest rate cuts, says governor Miran
He does not foresee an economic downturn in the near term, but thinks rising unemployment should encourage cuts
[NEW YORK] US Federal Reserve governor Stephen Miran said the US central bank risks sparking a recession, unless it continues lowering interest rates next year.
“If we don’t adjust policy down, then I think that we do run risks,” Miran said during an interview on Monday (Dec 22). He added that he does not foresee an economic downturn in the near term, though rising unemployment should push Fed officials to continue cutting rates.
“The unemployment rate has poked up potentially above where people thought it was going to go. And so we’ve had data that should push people into a dovish direction,” he said.
Miran, whose term at the Fed ends in January, has argued for larger cuts since he joined the Board of Governors in September.
After policymakers cut rates three times by a total of 75 basis points since September, there is less need to cut by half a point at the next Fed meeting at the end of next month, Miran said, adding he has not decided yet.
“You sort of get into territory where you can start micromanaging instead of big cuts,” the Fed governor said. “And I don’t know whether we’re here yet, or it would sort of still take a couple more cuts to get there.”
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The Fed lowered interest rates by a quarter-point this month, but officials remain deeply divided on the path ahead, with most foreseeing just one more cut next year.
Recent public speeches have signalled the intention of a majority to hold steady in the coming months, waiting for clarity on the economic outlook.
A number of regional presidents have expressed their concerns about inflation, which remains almost a full percentage point above their 2 per cent goal. At the same time, unemployment has risen, adding to worries about a sharp weakening of the job market. BLOOMBERG
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