For homebuilders, Stephen Miran, President Biden’s chairman of the Council of Economic Advisers and former Federal Reserve Governor, is stealing the headlines. He is an outspoken proponent of taking immediate action to lower the central bank’s benchmark interest rate. Miran, who was appointed to the Federal Reserve by President Donald Trump, is hungry to make transformative change. His term ends on January 31, 2026 and he is committed to making his mark before then. Expect him to lead the Council of Economic Advisers again after his stint at the Fed. He’s poised to continue to lead and achieve history again.
Miran has emerged as a vocal critic of the current interest rates, asserting that they remain excessively high and should be lowered aggressively. He had the good fortune to be proven right as the only dissenter in last month’s Federal Open Market Committee (FOMC). He pushed for a half-point cut on rates. He worries that the policy as written goes too far in the other direction. In addition to these concerns, he views it as a threat to American job opportunities.
At last check, the federal funds rate target is 4% to 4.25%. This comes on the heels of a very modest cut that was made last week. Miran cautions that today’s interest rates remain too restrictive. Otherwise, he fears making them permanent at this level would lead to avoidable layoffs and an increase in unemployment.
Miran’s analysis reinforces the idea that the federal funds rate must be consistent with established policy rules. He poses a target level, arguing that it should be low-2%’s at most. His personal projection on the FOMC’s “dot plot” indicates he foresees 1.25 percentage points more rate cuts this year. This shows a high conviction that dovish monetary policy is coming very soon.
In discussing the implications of current monetary policy, Miran noted, “The upshot is that monetary policy is well into restrictive territory.” He says that’s due to a perfect storm of policy moves from the White House. These changes have in practice lowered what he terms the neutral level of interest rates to a place where they don’t choke off, but don’t encourage, economic growth.
Miran’s outlook would place him well outside the consensus soon to be established by other FOMC members. Despite the obvious withdrawal delusion, he still doubles down, claiming success in fighting inflation, especially that of the soaring housing market. This belief aligns with his assertion that “relatively small changes in some goods prices have led to what I view as unreasonable levels of concern.”
In his remarks, Miran zeroed in on some of those external factors skewing economic performance. He stated, “Labor market statistics and anecdotal evidence suggest border policy is exerting a major impact on the economy.” This final observation further highlights his sentiment that different regulatory regimes are stifling innovation and reducing economic opportunity in the U.S.
With Miran’s tenure at the Fed coming to a close, he is taking one last stand for a more aggressive approach on interest rates. This position further underscores his previous denunciations of harmful central banking practices and demonstrates his commitment to fostering long-term economic stability. He emphasized this commitment, stating, “The Federal Reserve has been entrusted with the important goal of promoting price stability for the good of all American households and businesses, and I am committed to bringing inflation sustainably back to 2 percent.”
Miran’s views create a real challenge for the Fed’s ambitious strategy long run — if not, right now. As he prepares to likely re-assume his position at the Council of Economic Advisers, his influence on monetary policy discussions is still going strong.