In an interview with Bloomberg TV on Monday, Federal Reserve (Fed) Governor Stephen Miran argued that if the Fed maintains a restrictive stance of policy, it increases the chance that monetary policy will cause a downturn.
Key takeaways
“Neutral is quite a way below current policy.”
“A lot of factors drive financial markets.”
“It is a mistake to make conclusions about monetary policy from financial conditions alone.”
“Some financial metrics are loose but housing conditions for example are tight.”
“Changes in the neutral rate mean policy has passively tightened despite Fed cuts.”
“If the Fed maintains a restrictive stance of policy, it increases the chance that monetary policy will cause a downturn.”
“The Fed could get to neutral in a series of 50 bps cuts but does not need 75 bps cuts; economy is not dysfunctional.”
“Will not commit to another dissent in December, things could change.”
“Being too data dependent makes policy too backward looking; you want to make policy on the forecast.”
“The Fed knows the size of population and other shocks that have hit the economy, provides confidence in the forecast.”
“The alternative data on inflation is not that useful; but on the labor market it does signal slowing.”
“Possible that there is distress in some financial markets that is masked from the Fed.”
“When there is a series of seemingly unconnected credit problems it could be a sign policy is too tight.”
Market reaction
These comments received a neutral/slightly hawkish score of 5.4 from FXStreet Fedspeech Tracker but failed to trigger a noticeable market reaction. At the time of press, the US Dollar Index was up 0.15% on the day at 99.85.
