Stephen Miran, who President Trump recently appointed to the Federal Reserve Board, wants bigger, faster interest-rate cuts than other Fed officials. (Public Domain photo)
Farmers and other business borrowers would kill for interest rates a couple percentage points lower than today’s. Now the Federal Reserve Board has a governor who thinks they should have them.
That would be Stephen Miran, who joined the board last month to fill a term that will expire next January 31. He is on leave of absence from his position as chair of President Donald Trump’s Council of Economic Advisors.
The president wants the Fed to lower its benchmark federal funds interest rate three percentage points, which would mean well below 2%. Miran doesn’t go quite that far.
The fed funds rate should be in the mid-2% range, about 2 percentage points below today, he said recently. He was the lone dissenter when the Fed voted recently to drop the fed funds rate a quarter-point to a range of 4% to 4.25%.
Miran wanted a half-point cut. And, apparently, a couple more big cuts, soon. On the Fed’s September “dot plot,” one of the 19 members of the Federal Reserve Open Market Committee projected a fed funds rate below 3% by the end of this year, far lower than the other 18 forecast. It’s almost certain that voter was Miran.
In one respect, at least, Miran deserves compliments and thanks. In a recent speech in New York, he laid out his argument for a much lower federal funds rate in considerable detail. Too often in the current administration policies have been proclaimed without much supporting justification. Miran has supported his proposed fed funds rate policy with 28 footnotes.
Miran’s central contention revolves around the “neutral rate of interest,” which economists refer to as r-star. This is the rate that neither stimulates nor restrains the economy, the rate that’s consistent with the central bank’s dual goal of maximum employment and stable prices. Alas, the r-star rate is subject to considerable debate. It’s also a moving target.
Miran believes r-star is much lower than his Fed colleagues think and that the Fed’s current policy is therefore much more restrictive than they appreciate. If he’s right, the Fed is running the risk of a big runup in unemployment. It’s worth taking a minute, then, to look at why Miran thinks as he does.
In a nutshell, Miran believes Trump policies are bringing about major changes in the supply and demand equation for money. In his view, tariffs and tax-policy changes will bring in revenues to offset federal budget deficits, increasing the supply of funds. Tighter borders and deportations will slow the country’s population growth, decreasing demand for dollars. And deregulation will increase the economy’s productivity, also decreasing demand.
Is Miran right? While plausible, his arguments leave open many contradictory complexities. Yes, deportations will slow population growth, but some employers who depended on immigration for labor will have to raise wages to attract replacements. That’s inflationary and puts upward pressure on interest rates.
Similarly, while a lower federal budget deficit would point to lower interest rates, it’s hard to believe Trump’s policies will reduce the deficit. For example, the tariff revenue estimates seem optimistic. If big tariffs work the way Trump wants them to, tariff revenue will decline over time as consumers stop buying expensive foreign goods in favor of domestically produced competitors.
And while deregulation can indeed make the economy more efficient over time, the Trump team is also meddling in the economy in ways that could make it less efficient. Using the government’s “golden share” from the Nippon Steel acquisition, Commerce Secretary Howard Lutnick recently blocked US Steel from moving production from an outdated facility even though the company had promised to continue paying the workers.
Perhaps Miran will give another speech addressing these points. At the moment, he is a voice in the wilderness. Other economists are skeptical. Bond investors aren’t pricing bonds in line with his views. And he is an outlier on the Federal Reserve. While he sees the fed funds rate moving below 3 this year, none of the 18 other dot plotters forecast it below 3.75%.
That doesn’t mean there won’t be more interest-rate cuts in the months ahead, but judging from the Fed’s last meeting, they’ll be quarter-point cuts, not the half-point reductions Miran advocates.
There’s good reason for caution. The most recent available data showed inflation worsening even as the job market softens. Fed policymakers are still haunted by their mistake in letting inflation get out of control four years ago. While 11 of the 12 voting FOMC members supported the quarter-point cut at the September meeting, the meeting minutes released Oct. 8 indicate a few would have also supported leaving the fed funds rate unchanged.
With the government shut down, the Fed may not have the usual updated employment and inflation reports available at its next meeting in late October. That, too, will argue for caution.
Bottom line: Odds are it will take a lot longer to get interest rates below 3% than farmers and other business borrowers would like.
Former longtime Wall Street Journal Asia correspondent and editor Urban Lehner is editor emeritus of DTN/The Progressive Farmer.
This article, originally published on October 10 by the latter news organization and now republished by Asia Times with permission, is © Copyright 2025 DTN/The Progressive Farmer. All rights reserved. Follow Urban Lehner on X @urbanize
