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Investing.com -- Former Treasury Secretary Lawrence Summers harshly criticized Stephen Miran’s first speech as Federal Reserve governor, calling it the weakest he could remember from a Fed official.
"I cannot remember an analytically weaker speech given before the New York Economic Club or given by a Fed governor," Summers said during an appearance on Bloomberg Television’s Wall Street Week with David Westin.
Miran, who served as President Donald Trump’s White House chief economist before joining the Federal Reserve ahead of the September 17 rate decision, recently delivered a speech focused on the neutral interest rate - the theoretical level where monetary policy neither stimulates nor restricts economic activity.
In his remarks, Miran argued that Trump administration policies had pushed this neutral rate lower, making the Fed’s current stance excessively restrictive. He concluded that the policy benchmark is "roughly 2 percentage points" too high.
Summers, a Harvard University professor, acknowledged Miran was correct to emphasize the importance of the neutral rate, a concept that current Fed Chair Jerome Powell and other policymakers have typically downplayed in their decision-making process.
However, Summers expressed strong disappointment with Miran’s analysis, stating: "Harvard’s got plenty of grade inflation, but even so, Steven Miran’s analysis of the neutral interest rate would not have been worthy of a passing grade in even an advanced undergraduate course."
Summers added that if this represented "the best case for the radical reduction in interest rates that President Trump has been advocating, then that case is even weaker than I had previously supposed."
Miran dissented from the Fed’s September decision, advocating for a larger 50 basis-point rate cut instead of the 25 basis-point reduction approved by the majority of the committee.
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