Coming to the economy. Investors are watching for signals from policymakers heading into a key year for the Federal Reserve, with a new chair expected to be announced soon. Cleveland Fed President Beth Hammack among those preferring to hold rates higher for longer. Well, our next guest is taking the other side, voting for a 50 basis point cut at the Fed's last meeting. Joining us now is Federal Reserve Governor Stephen Miran. Very good morning to you, Stephen. Thank you so much for joining us.
Good morning. Thanks for having me back.
So let's start with Beth. Actually came out over the weekend. Then we heard from Williams as well on Friday saying that potentially where we are right now, rates should be steady and they're looking at what's going on with inflation. Even the Fed chair was talking about maybe you need to look at the inflation data we had with some grain of salt because of the government shutdown. How are you viewing that side of the Fed's mandate right now?
Yeah. So I gave a speech on the inflation outlook last week. And I still believe everything I said last week in light of this week's print, last week's print. I mean, look, there were a couple of anomalies in last week's print related to consequences of the government shutdown, which have distorted and delayed economic data that we need to make policy. But those consequences, I think, are not huge when you get to the ultimate PCE print, which is what the Fed targets. It's probably ultimately going to be in the neighborhood of 2/10 of a point, maybe a 10th of that is going to be shelter, and tenths of the other stuff is going to be calendar stuff like prices, like data were collected in the second half of the month around Black Friday stuff. But we'll have to see when we get the peak data. But it is true that the shelter stuff was somewhat distorted by some of the quirks of recovering from the shutdown. But it's also true that the shelter data were distorted for most of the year because of really long lags with which shelter inflation is calculated. If you look at market rents, they've been running at about a 1% rate for about two years now. That's not indicative of any price pressures in housing whatsoever. But it takes a really long time for measured shelter inflation to catch up to that just because of various quirks of the statistical measurement process that I got into in my speech last week. So I do think there was maybe some downward bias in last week's prints, but at the same time, there's been tons of upward bias in data for the entire year. And it's inappropriate to say, okay, well, we have to adjust for the downward bias, but we're going to accept upward bias. That itself is a deeply biased position. We've got to be clear-eyed about both.
What do you feel like, yourself included, but do you feel like members of the Fed are cherry-picking what about inflation they like or dislike?
Well, I think that for the last few months we've had data come out in accordance with my view of the world. The inflation data have steadily come in cooler than expectations. The unemployment rate has picked 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. And I think it's somewhat problematic if you see those data coming out, you don't adjust your policy prescriptions in a dovish direction. What does that say about the reactivity of policy to the economy? I think it reflects very poorly upon the institution.
At the end of that speech at Columbia, you nodded to the fact that recessions are inevitable. The Fed's job is to forestall them as much as they can. Policymakers' jobs are that. I'm very curious when you look at the labor market in particular, the rise that we've seen in the unemployment rate, that's the kind of rise we've seen customarily before recessions. How do you assess the risk of there being a recession here in the near term when you look at the labor market, for instance?
So I don't see a recession in the near term, in part because we are adjusting our policy rate by lowering it, which is appropriate. My view, as I've described, is that a variety of shocks that hit the economy, including changes to the population growth rate due to the changes in the border policy, have pushed what we call the neutral rate down. And policy needs to adjust downward to reflect that downward shift to neutral. If we don't adjust policy down, then I think that we do run risks of rising recessions. I don't think it's too late to prevent that. And so I think it's important that we keep on adjusting our policy rate down. But at the moment, it's not. My best guess is in part because I think that we ultimately will end up continuing to adjust interest rates down.
When asked about the utility of the Miran dissent, so we had the Fed chair asked at that press conference about the increasingly fractured nature of the Fed committee. We've talked about quiet dissents as well. What are you achieving or what's the reaction been to you dissenting as you have been, kind of in the conversation among the committee?
Yeah. So, look, there's not really any strategy here. I'm just transparent and say what I think and always have. And that gets me in a lot of trouble.
And does it? Or is it a constructive dissent? So when you dissent in the way in which you do, is it a constructive dissent? Do you find that others are willing to engage with you and your perspective on inflation, for instance?
Yeah, well, my perspective on inflation is, look, in my first speech, I talked about inflation a little bit, but I mostly was focused on neutral. In my speech last week, I really drew out a lot about my outlook for inflation. That was sort of implicit in the first speech and cursorily treated. And I really drew that out. So my views on inflation haven't been out there fully fleshed out for the committee for so long. And now we're going into holiday season. But I have found that people are constructive. They want to discuss these things. And I think that's important. And, you know, look, one positive benefit of me potentially dissenting like this is that it introduces a wider variety of views. I think it's really important to avoid groupthink. I think if you fall into groupthink, you start questioning where you could be wrong and then it just becomes much easier to be a complacent consensus that is in error. I think we've seen that over and over this year, for example, on tariffs.
Let's talk potentially about tariffs. The president is pushing for this $2,000 tariff dividend. The Treasury secretary is talking about these tax refunds start of 2026. Is there potential that more money in consumers' pockets could goose inflation?
Yes. So there is a potential for some of these factors to boost economic growth with respect to tax refunds. I think that with respect to tariff refunds, we need to wait and see what the policy looks like before getting into analyzing its consequences. If there does end up being a policy with respect to tax refunds that are a result of the already legislated tax bill, the one big beautiful bill act from last year, those are already baked into the forecast and they will provide a little bit of demand stimulus. But there's so much other stuff going on as a result of policy in OBBB, in deregulation, in other things that are going on, policy that ultimately pushes out the supply side of the economy, too. And my view is that if you push out the demand side while you're putting the brakes on the supply side, you get inflation. If you push out supply and demand at the same time, it doesn't really have an effect on prices.
But do you think it was a mistake that when we had under the Biden administration, the American Rescue Plan, an Inflation Reduction Act, sending out checks to American consumers? Was that an error?
