Fed’s Miran says housing inflation key to rate cut views

Investing.com -- Federal Reserve Governor Stephen Miran stated Wednesday that his support for rapid interest rate cuts hinges on expected housing market disinflation, and he would reassess his policy stance if housing costs don’t moderate as anticipated.

"We are due for a significant amount of disinflation from the housing market," Miran said at a Nomura research forum. "So much of my view is predicated on the shelter channel that if that started coming in higher... I would have to look at the entire policy framework."

Miran indicated his policy differences with Fed colleagues relate more to the speed of rate cuts rather than their ultimate destination. He expressed confidence that "in coming quarters there will be a material decline in services inflation driven by housing."

The Fed governor noted that current monetary policy is more restrictive than commonly perceived because the neutral interest rate has fallen. He also suggested that AI investment could potentially lead to a higher neutral rate in the future.

On trade issues, Miran stated there’s "no evidence in the data that tariffs are raising inflation," adding that U.S. goods inflation rates are comparable to those in other countries. He warned that renewed U.S.-China tensions represent "a serious issue" that increases economic uncertainty and could pose "material economic downside" if threats materialize.

Regarding Fed communications, Miran suggested reevaluating whether the central bank still needs tools like the inflation target and economic projections summary, which were introduced after the Great Financial Crisis when deflation was a concern.

Miran also advocated for ending quantitative tightening "in the not too distant future," questioning the marginal benefit of further balance sheet reductions.

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