Federal Reserve (Fed) Board of Governors member Stephen Miran made another long-winded appearance on Tuesday, reiterating that he believes any underlying inflation pressures within the US economy are entirely contained within migrant population effects, and will be solved mainly by immigration controls.
Miran also gave his own personal estimate of the neutral rate of interest, or r-star as it is known to economists, of 0.5%. Miran’s unexplained personal model for r-star comes in well below even the most aggressive common r-star models, which all currently land somewhere in the 1% to 0.8% range at the absolute lowest.
Key highlights
Growth in the first half of the year was slower than expected amid uncertainty.
A lot of uncertainty on the economy has lifted.
There are reasons to be more optimistic going forward on uncertainty lifting.
If the economy does well, it doesn’t have firm implications for monetary policy.
Fed policy is more restrictive as neutral rate came down, and restrictive monetary policy has risks.
There are risks if monetary policy isn’t adjusted.
My view is that monetary policy should be forward-looking.
Monetary policy should be forward looking given the lags of policy impact.
I’m more sanguine on inflation outlook than many others.
The average rent inflation should moderate.
Easing shelter inflation gives me comfort that price pressures will ease.
Being data dependent makes policy look backward.
My best attempt at a real neutral rate estimate is 0.5%.
Bond market reaction to Fed supports push to aggressively cut rates.
I don’t think the Fed needs to actively target long-term rates.
The Fed does not need to target long-term rates in normal circumstances.
All economic data needs nuanced interpretation and analysis.
Declining response rates have been a significant problem.
I remain optimistic we’ll have data by the October Fed meeting.
Private data is not a sufficient replacement for government data.
I don’t see tariffs as a material driver of inflation.
Tariff inflation may be yet to come, but i haven’t seen it yet.
I don’t see the need to change the Fed’s inflation target.
