Federal Reserve official Stephen Miran said he favors three, and possibly four, interest rate cuts this year, outlining a more accommodative stance than many had expected.
Speaking at a policy event in Washington, he stressed that any move will remain “data‑dependent” as inflation risks have not fully receded. He warned that policymakers must respond to real‑time economic data rather than commit to a fixed path for borrowing costs.
Miran’s view contrasts with the Federal Open Market Committee’s March median projection, which pointed to only one rate cut in 2026, underlining the range of opinions inside the central bank.
Fed path: more cuts, but data will decide
Miran indicated that while he supports a more accommodative stance, he does not see the current outlook as warranting aggressive or pre‑committed easing. Instead, he emphasized a gradual approach in which each potential cut is weighed against evolving inflation, growth, and labor data.
This stance leaves markets to interpret incoming economic releases as key signals for the pace and scale of any policy adjustment, with particular attention on inflation indicators and measures of economic slack.
Inflation seen nearing target, but pressures persist
Miran estimated that 12‑month personal consumption expenditures (PCE) inflation could return close to the Federal Reserve’s 2 percent target within a year. That projection, he suggested, would be a key benchmark for any policy shift.
Recent data show underlying inflation already moving in that direction. The latest trimmed mean PCE inflation rate stood at 2.43 percent, slightly above target but continuing to edge lower.
However, he noted that broader price measures remain higher. The Consumer Price Index for the year ending in March 2026 was 3.3 percent, underscoring the “persistent price pressures” he said still require vigilance.
Miran also argued that the recent energy shock has not materially changed the inflation outlook over the next 12 to 18 months compared with the period before the global energy disruption, though it has increased uncertainty around forecasts.
No wage‑price spiral, expectations anchored
Miran said there is no sign of a wage‑price spiral taking hold. Long‑term inflation expectations, he added, remain stable, while core goods and housing inflation are likely to ease further.
Recent wage data support that assessment. Over the 12 months through March 2026, real average hourly earnings rose 0.3 percent. Nominal average hourly earnings increased 3.5 percent over the same period, roughly in line with headline inflation at 3.3 percent.
This pattern suggests wages are growing, but not at a pace that would drive a self‑reinforcing cycle of accelerating prices and pay.
Labor market cooling, but still resilient
Miran characterized the labor market as cooling, a view echoed by the Federal Reserve’s latest Beige Book, which described labor demand as stable, wage competition as muted, and most hiring focused on replacement rather than expansion.
At the same time, recent figures show continued resilience. The economy added 178,000 nonfarm payroll jobs in March, surpassing expectations, while the unemployment rate fell to 4.26 percent. Initial jobless claims dropped to 207,000 in the week ending April 11, reinforcing the picture of an economy that is slowing but not stalling.
Miran suggested that the traditional link between growth and unemployment has weakened compared with past cycles, potentially due to structural changes such as the wider use of artificial intelligence and evolving business models.
Outlook for 2026 and the neutral rate
Looking beyond this year, Miran said the Federal Reserve may deliver only three rate cuts in 2026, depending on how price and wage trends develop.
He put the neutral policy rate — the level that neither stimulates nor restrains growth — near 2.5 percent in nominal terms, implying a real neutral rate of about 0.5 percent. That estimate offers a reference point for where interest rates could settle once inflation is fully under control and the economy is growing at a sustainable pace.
Complex inflation drivers beyond tariffs
Miran rejected the idea that tariffs alone are responsible for elevated goods inflation. He argued that such claims ignore the combined effects of global supply chain disruptions and broader macroeconomic forces that have lifted costs.
He noted that even before the recent conflict and energy shock, the structure of inflation had become more complex for policymakers. The war, he said, widened the range of possible outcomes around the central inflation forecast, increasing uncertainty rather than changing the central scenario outright.
Energy costs and household spending
Although the United States is a net energy exporter, Miran said shifts in household spending linked to higher energy costs are weighing on economic expansion. Higher fuel and utility bills leave less room for other consumption, softening demand in parts of the economy.
He framed current policy as a balancing act: maintaining pressure on inflation while keeping open the option of easing later in the year if underlying price pressures continue to moderate.
For traders, his remarks signal a central bank that is open to more cuts than its formal projections currently imply, but only if forthcoming data on prices, wages, and employment confirm that inflation is firmly on course back to target.
Wondering how rate cuts could hit crypto? Explore their impact on digital assets in our in‑depth guide, interest rates and Bitcoin.
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