“I approached it the same way we approached the first one,” he said, referencing his earlier advocacy for a half-point move. “I think that neutral is quite a ways below where current policy is.”
He argued that the Fed’s approach, if maintained, could amplify risks to the economy, especially as monetary policy works with long and variable lags.
Neutral rate shifts and policy lags
Miran explained that shifts in the neutral rate—driven by factors like population growth and fiscal deficits—mean that policy has “passively tightened” through 2025, even as the Fed has cut rates.
“If neutral is here and policy’s up here, you’re very tight. If neutral is here and policy’s down here, you’re very loose. But if you stay where you are and then neutral goes down, you passively tightened because the neutral rate has shifted and so policy has grown tighter over the course of the year,” he said.
Asked why he didn’t push for a 75 basis point cut, Miran said, “We’re a fair way from neutral. I could imagine getting there in a series of 50 clips. I don’t think the economy is dysfunctional right now. I don’t think that financial markets are dysfunctional right now. I don’t think we need to move even faster than that for those reasons.”