Fed’s Miran warns economy at risk without swift rate cuts

Federal Reserve headquarters

Federal Reserve Governor Stephen Miran said the US central bank risks damage to the economy by not moving rapidly to lower interest rates.

“I don’t think the economy is about to crater. I don’t think the labor market is about to fall off a cliff,” Miran said Thursday on Bloomberg Surveillance.

But given the risks, “I would rather act proactively and lower rates as a result ahead of time, rather than wait for some giant catastrophe to occur,” he said.

Miran, a new Fed board member who was appointed by President Donald Trump, is an outlier among the central bank’s policymakers in calling for immediate, aggressive rate cuts.

He argued the Fed’s current policy rate, which is in a range of 4% to 4.25%, is highly restrictive because it’s well above his estimate of the so-called “neutral” level — where policy neither boosts nor restrains the economy.

“The neutral rate is drifting down, and as a result of that, it’s incumbent upon policy to adjust in response,” Miran said.

“If policy stays excessively restrictive for too long, then you do get to a situation in which you have a meaningful increase in the unemployment rate.”