(Kitco News) – The recent escalation in trade tensions between the United States and China has increased the level of uncertainty in the growth outlook, and this makes it more important for policymakers to quickly lower interest rates, according to Federal Reserve Governor Stephen Miran.
“There’s now more downside risks than there was a week ago, and I think it’s incumbent upon us as policymakers to recognize that should get reflected in policy,” he said Wednesday during an event organized by CNBC. Miran added that higher uncertainty around trade policies between China and the U.S. has introduced a “new tail risk.”
“I wouldn’t say that I want even lower rates now than I did a week or a month ago,” Miran said. “However, with the change to the balance of risks, I think it becomes even more urgent that we get to a more neutral place in policy quickly.”
Last Friday, President Donald Trump threatened to impose an additional 100% tariff on China after the Asian nation imposed restrictions on exports of rare-earth minerals. The Trump administration said it would also consider controls on its sales of “any and all critical software” to China.
Miran made it clear after the September Fed meeting that he advocated lowering the Fed funds rate by an additional 1.25% by the end of 2025. The median projection from the 19 FOMC members was for two more quarter-point cuts this year. Miran was the only member who dissented from the consensus for a 25-basis-point cut at the meeting, instead favoring a 50-basis-point rate cut.
He said on Wednesday that two more rate cuts this year “sounds realistic,” but did not say how large he thought each cut should be.
Miran has repeatedly called for looser monetary policy, dissenting against policymakers’ decision to lower the Fed’s policy rate by a quarter-percentage point last month in favor of a half-point cut.
Miran has faced criticism for his decision to, sparking concerns about his independence from the Trump administration. On Wednesday, he said appointing CEA chairs to the Fed was a practice that “long predates” Trump’s time in office.
Miran, who has taken a leave of absence from his position as chair of the White House Council of Economic Advisers to serve at the Fed, also said he had “severe FOMO” after news of trade tensions with China broke.
“When I saw the China rare-earth announcement, of course, I started imagining what must be going on with my former colleagues,” he said. “I was imagining all the meetings that must be happening, and the plans, and what people were discussing, or thinking about doing — and I spent the day discussing whether a small regional bank should be allowed to make some modest change to its loan offerings.”
At a separate event on Wednesday afternoon, Miran said it would be appropriate to stop shrinking the central bank’s balance sheet “in the not-too-distant future.”
“I don’t know what the marginal benefit of additional reductions from here are,” he said.
