Miran chastises Fed for wading into politics under Biden

• Key insight: Federal Reserve Gov. Stephen Miran said Thursday that the central bank's independence relies on being "non-political," which in turn requires the central bank to not promote political priorities like climate change impacts or racial justice.
  
• Expert quote: "Critical to maintaining independence of the central bank is the central bank be viewed as an honest player and non-political. That means the central bank has to studiously and vigorously pursue not being involved in political issues at all." — Fed Gov. Stephen Miran
  
• What's at stake: President Donald Trump has been pressuring the central bank to lower interest rates for months, and Miran — who is on leave from his position as chair of the White House Council of Economic Advisers — is Trump's first pick to join the board in his second term.
  

WASHINGTON — Federal Reserve Gov. Stephen Miran said Thursday that the central bank's independence depends on its officers remaining apolitical, and that past efforts to study climate change and racial inequality undermine that independence.
Speaking before an Institute for International Finance conference, Miran said that for the central bank to be perceived as independent, it must be seen as an apolitical actor, and that prior moves by the central bank have sent precisely the wrong signal.

"Critical to maintaining independence of the central bank is the central bank be viewed as an honest player and non-political," Miran said. "That means the central bank has to studiously and vigorously pursue not being involved in political issues at all."

Miran referred to initiatives taken up during the Biden administration — such as various efforts to study and stress test for climate change and to examine racial disparities — saying they send the message to a significant portion of the voting public that the Fed has cast its lot with their political opponents.

"When the central bank gets involved in issues like climate change, when the central bank gets involved in highly charged political issues like racial politics, and people start arguing that those sort of policy issues are interfering with our ability to achieve our employment mandate, that is politicization of the central bank," Miran said. "That convinces parts of the … voting public that the central bank is in one corner or the other, and that's incompatible with independence."

Miran went on to say that Fed officials commenting on the potential inflationary effects of tariff policies unfairly singles out one policy for analysis and critique when other policies upheld by the prior administration received no similar skepticism.

"That's fine as an economic statement, but unless you do that for every economic policy, you've singled out the economic policies of one portion of the voting public," Miran said. "And if you did that also for climate regulations or tax rates or deficits, you'd be even-handed and saying, 'I'm going to study every policy that's out there and publicly ascribe inflation to each.' But if you only do that for the policy of one part of the voting public, then that part of the voting public will start to view you as a political actor. 

"And so for me, maintaining central bank independence is of critical importance, but I think that in order to do so, we need to be viewed as non-political, and that means we need to keep to our knitting. We need to stay out of highly politicized issues like climate and racial politics, we need to treat all policies equally in terms of how we are evaluating them and talking about them, and not unnecessarily highlight one set of policies while ignoring other policies. If we do that, we can be non-political."

President Donald Trump nominated Miran to the Fed board, and Miran joined the central bank in late September, having taken a leave of absence from his prior position as chair of the White House Council of Economic Advisers. As CEA chair, Miran had been critical in spearheading President Trump's tariff policies, and critics decried his nomination as part of an effort by Trump to politicize the Fed.

Miran joined the Fed board amid a campaign by Trump to pressure the Fed to lower interest rates, and as a Fed governor, Miran has espoused dramatically lowering interest rates over the coming months.

At his first meeting in September, Miran cast the lone dissenting vote, arguing for a 50-basis-point interest rate cut rather than the 25-basis-point cut agreed to by the rest of the Federal Open Market Committee.

Miran said Thursday that he continues to favor a 50-basis-point cut at the Fed's October meeting because the effects of tariff and immigration policies have driven down the neutral interest rate more aggressively than other economists assume.

"My view is that, given how restrictive monetary policy is, it makes sense to get towards neutral in a quick manner," Miran said. "So I thought a series of three half-point cuts is just an easy way of getting there."

Miran noted that he does not favor more aggressive rate cuts than 50 basis points, saying those kinds of oversized cuts are only sensible in the face of an economic emergency. But he stood firm that cutting rates 25 basis points at a time may be too cautious and slow to counteract emerging labor market pressures. 

"I think going more than 50 [bps] at a time is something that you really only want to do in an emergency," Miran said. "I don't think that we're in an emergency, but at the same time, moving there slowly, at a pace of 25 basis point cuts every six weeks, I think is taking the policy adjustment more slowly than it needs to be."