Fed has excess focus on backward-looking data, says former Fed Governor Stephen Miran

Summary

Former Fed Governor Stephen Miran argues the Fed should cut rates now because policy lags 12-18 months and his forecasts show inflation will be low in the second half of 2027. He points to persistent disinflation from shelter and wages, dismisses current high inflation as transitory supply shocks, and criticizes the Fed's backward-looking data dependence. He sees no credibility risk as long as inflation expectations remain stable.

• Miran contends monetary policy has 12-18 month lags, requiring forward-looking decisions based on 2027 inflation, not recent data.
• He identifies shelter (market rents growing 1%) and labor markets as persistent disinflationary forces that will keep future inflation low.
• Current high inflation is attributed to transitory supply shocks like energy prices, which are hard to extrapolate 12-18 months out.
• He believes the Fed is too focused on backward-looking data and not enough on why inflation would be elevated in mid-to-late 2027.
• Inflation expectations beyond one year remain stable, so Fed credibility is not at risk despite inflation currently above target.