Too Soon to Draw Conclusions on Oil, Fed Governor Miran Says

Summary

• Miran dissented at the last FOMC meeting, voting for a 25 basis point rate cut, citing that the labor market still requires additional monetary support.
• He urges a 12-18 month policy horizon, arguing it is too early to adjust monetary policy based on recent oil price increases.
• Higher oil prices have prompted him to raise his year-end inflation projection to 2.7%, but he views this as confined to headline inflation.
• Miran notes that higher oil prices depress aggregate demand by shifting consumer spending to energy costs, which can increase unemployment and partially offset inflationary effects.
• The threshold for raising interest rates is high; necessary conditions include the oil shock spilling into longer-term inflation expectations or triggering a wage-price spiral.
• He contrasts current policy with the highly accommodative fiscal and monetary settings in 2021-2022, which amplified supply shocks like the Russia-Ukraine oil price spike.
• The Fed has a history of looking through oil shocks, and Miran believes it would be unusual to deviate from that stance now.