The Fed’s most ardent dove, Stephen Miran, said he would reverse his December shift toward easier policy if he is still at the Federal Reserve by the March meeting, citing firmer labour data and renewed goods inflation.
“If I had no more data in hand right now and had to put a dot down at the March meeting, I would respond to the data again and probably end up moving my dot back to where it was in September,” Miran told The Peg in an interview on Wednesday, referring to the Federal Reserve’s Summary of Economic Projections, also known as the “dot plot”.
Miran lowered his end-2026 rate projection by 50 basis points between September and December, so reverting to his earlier estimate would amount to a hawkish shift.
The reason for the pivot, he said, is straightforward: “The labour market came in a little bit better than I came to expect over the last few months. There’s been some signs of even more firming in goods inflation.”
The comments come as FOMC minutes released on Wednesday revealed reduced appetite among policymakers for imminent rate cuts as well as discussions of the possibility of future hikes if inflation remains stubborn. This led markets to trim near-term easing bets, lifting the dollar and yields.
Miran’s changed perspective suggests the bar for rate cuts may be higher than markets currently expect.
Miran is currently filling Adriana Kugler’s old Fed seat after she unexpectedly resigned in August last year following an ethics probe into her financial holdings. While Kugler’s term officially expired on Jan. 31, governors can continue to serve past the formal end of a term until a successor is confirmed.
Investors widely assume Miran will be the governor to step aside to accommodate President Trump’s nomination of Kevin Warsh as Fed chair. But the timing remains uncertain: Warsh must first navigate Senate confirmation, a process that can stretch for weeks.
Despite the uncertainty over the continuity of his role, Miran said it “probably will be the case” that he’s still at the Federal Reserve by the March meeting.
Earlier this month, Miran resigned as chair of the President’s Council of Economic Advisers, after previously pledging during his confirmation hearing that he would not hold dual roles beyond four months if his Fed tenure were to extend.
With Warsh’s nomination now awaiting Senate action, the timeline for any transition remains unclear. That uncertainty is compounded by President Donald Trump’s threat to pursue criminal charges against sitting chair Jerome Powell — a move that some analysts worry could entangle Warsh’s confirmation in a broader political clash over the Federal Reserve’s independence.
Any delay in Senate confirmation would increase the likelihood that Miran remains in his seat through the March meeting — and submits a fresh dot reflecting his more hawkish stance.
Data responsive
Asked what markets might misunderstand about his policy framework, Miran suggested that some may view him as less responsive to incoming data than he believes he is.
“I don’t know what markets think about my reaction function,” he said. “I would say maybe it’s that I’m unresponsive to economic developments. I don’t think that’s the case.”
He pointed to his December shift lower as evidence that he adjusts his position when the outlook changes.
“Inflation data had come in better than I expected, and the labour market had come in worse than I expected over that period,” he said, explaining his earlier 50 basis point downward revision.
At the same time, Miran drew a distinction between reacting mechanically to each data print and setting policy based on a forward-looking assessment.
“My view is that monetary policy works on the economy with lags,” he said. “Because it takes 12 to 18 months for monetary policy to really hit the economy, you have to make policy based on a forecast.”
Inflation ‘anomalies’
Miran reiterated his belief that certain components of the inflation basket are distorting the signal policymakers are reacting to — particularly portfolio management services and shelter.
He said the Bureau of Economic Analysis effectively treats rising asset values as price increases for management services, a methodological choice that may be appropriate for national accounting but less so for monetary policy.
“These portfolio management services have contributed 36 basis points to core inflation in the most recent data release over the last year,” he said. “Historically, it’s normally more like six.”
In his view, that jump reflects a measurement dynamic tied to asset prices rather than an underlying acceleration in service-sector inflation. If the bias grows over time, he warned, it implicitly shifts the effective inflation target.
“What matters is that the biases grow or shrink over time, because if they grow or shrink over time, then you’re implicitly moving the inflation target,” he said.
He made a similar argument about shelter, where official measures rely heavily on lagged rental data. Because renewal leases have now caught up with new lease rates — and market rents have been growing at roughly 1 per cent for several years — he expects measured shelter inflation to slow materially.
“The measured shelter inflation is picking up the rental market of three or four years ago,” he said. With renewal rents now aligned with new rents, landlords face a market constraint that limits further acceleration.
Taken together, Miran suggested that if these distortions are adjusted for, “inflation is not doing so bad.”
Yet he stopped short of arguing for immediate easing on that basis, emphasizing instead that policy must remain forward-looking.
Fed funds rethink
Beyond the policy rate, Miran signaled openness to further balance-sheet reduction — but only alongside regulatory reform.
He argued that the thresholds separating abundant, ample, and scarce reserves are shaped heavily by regulation, particularly liquidity requirements. Reforming those constraints, he suggested, could lower reserve demand and allow the Fed to shrink its footprint without triggering funding stress.
“It does strike me as very plausible to start making the types of incremental regulatory reforms … that would reduce thresholds between abundant, ample, and scarce, and allow you to shrink the balance sheet without returning to scarce reserves,” he said.
“My preference would be … to lower those [regulatory] thresholds, and then to shrink the balance sheet, rather than saying we’re going to keep the regulatory system as it is and then go to scarce.”
A push to shrink reserves without regulatory adjustment could risk volatility in repo markets. Miran suggested his framework implied a path that could support bank credit while gradually draining liquidity.
He added that Vice Chair Michelle Bowman’s deregulatory agenda could become “turbocharged” in that scenario.
Asked about the Fed’s growing reliance on administered rates, such as interest on reserve balances and the overnight reverse repo facility, and what that bodes for the future of the federal funds market, Miran questioned the rate’s ongoing centrality in the Fed’s operating framework.
“The Fed funds market very clearly has diminished in importance relative to the administered rates,” he said. “I’m not quite sure why we hold on to the Fed funds rate.”
With administered rates increasingly anchoring short-term funding markets, Miran suggested the implementation framework itself could warrant reconsideration — particularly if balance sheet reduction and regulatory reform move forward in tandem.
“If you’re going to engage in shrinking the balance sheet and transform Miki [a reference to Governor Bowman] into super Miki, I would imagine that maybe you also want to rethink the implementation mechanism at the same time.”
Any shift away from the traditional Fed funds target would have structural implications for money markets, derivatives tied to the effective funds rate, and the broader plumbing of U.S. monetary policy.
