Fed Governor Miran on Why Inflation Fears Are Overstated

Summary

• Governor Stephen Miran dissented in favor of a 25 bps rate cut, arguing inflation is overstated while the labor market is gradually weakening and deserves additional monetary support.
• He believes inflation is less problematic due to measurement quirks like portfolio management services, which bias inflation readings up by 30-40 bps, and powerful disinflationary supply shocks.
• Oil price shocks should be "looked through" by policy. Their inflationary impact is front-loaded and has little consequence 12-18 months out, when monetary policy affects the economy, and shows no bleed-through into longer-term inflation expectations.
• Powerful positive supply shocks are providing persistent disinflationary pressure: AI increases productive capacity, and deregulation (easing over the last ~15 months) is estimated to drag inflation down by 0.3%-0.5% per year for several years.
• The current policy rate is ~1% above his estimated neutral rate (2.5%-2.75%). He believes policy is modestly restrictive and holding the economy back unnecessarily, advocating for a move to neutral this year.
• The neutral rate (R*) is being pushed higher by AI's productivity boost but weighed down by collapsing population growth post-pandemic and an improving fiscal deficit, largely due to tariffs.
• The "running the economy hot" narrative is flawed as it assumes a static supply side. Innovations like AI, deregulation, and capital deepening (via tax incentives) increase economic "horsepower," allowing faster demand growth without inflation.
• "Skinny" master accounts for stablecoin issuers are an active area of Fed rulemaking and could be an important step for financial innovation by improving payment system access.
• He is very optimistic about stablecoin growth, but sees the primary demand driver as global pools of savings currently behind capital controls or in underbanked regions seeking dollar exposure, not domestic users who already have dollar deposits/MMFs.
• Significant stablecoin adoption could funnel large global capital inflows into dollar instruments, creating a force similar to the early 2000s "global savings glut" that would weigh on the neutral interest rate.
• He views tokenized deposits as an incremental improvement to existing bank services rather than a revolutionary change, but is open to changing his view.