Stephen Miran, the Trump advisor appointed to the Federal Reserve Board of Governors who was sworn in just hours before last week’s meeting, thinks the Fed should reduce interest rates quickly, as do other governors appointed by Trump.
Fed Chair Jerome Powell says, not so fast.
In remarks made in Rhode Island Tuesday, Powell – who has faced tremendous pressure from Trump to lower rates – said a cautious approach to future rate cuts is needed.
According to The Associated Press, Powell talked about the risks to both of the Fed’s goals of seeking maximum employment and stable prices. With the unemployment rate rising, he said, the Fed agreed to cut its key rate last week. Yet he did not signal any further cuts on the horizon.
If the Fed were to cut rates “too aggressively,” Powell said, “we could leave the inflation job unfinished and need to reverse course later” and raise rates, according to the AP report. But if the Fed keeps its rate too high for too long, “the labor market could soften unnecessarily,” he added.
It was the same caution Powell urged during a press conference last week, after the Fed announced its first rate cut this year. At that time he said, “it’s challenging to know what to do.”
Other governors want to move faster. On Monday, Miran pushed for a reduction of its rate to as low as 2% to 2.5%, from its current level of about 4.1%. And earlier Tuesday, Fed governor Michelle Bowman also said the central bank should cut more quickly. Bowman, who was appointed by Trump in his first term, said inflation appears to be cooling while the job market is stumbling, a combination that would support lower rates.
