Federal Reserve Governor Milan stated on Friday that the weak February nonfarm payroll report further strengthens the case for the central bank to lower interest rates further. Responding to the Bureau of Labor Statistics report showing a loss of 92,000 jobs in the US for February, Milan said in an interview that the Fed should focus more on supporting the labor market rather than worrying about inflation. He stated, "I don't think we have an inflation problem. I think the labor market needs a more accommodative monetary policy. Furthermore, I believe it is not appropriate to maintain a slightly restrictive policy stance instead of a neutral one. I think a stance close to neutral is appropriate." Currently, the Fed's key interest rate target range is 3.5% to 3.75%, following three consecutive 25-basis-point cuts in the second half of 2025. If Milan's view prevails—keeping rates near a neutral level—he believes the neutral level is about one percentage point lower than the current level. The consensus among Fed officials at their December meeting was that the neutral level—neither restraining nor stimulating the economy—is approximately 3.1%, implying the possibility of two more rate cuts. Milan has consistently argued that elevated inflation readings depend more on how the Commerce Department and Labor Department measure inflation rather than reflecting genuine underlying pressures. One factor he mentioned is portfolio management fees, which have increased alongside overall stock market gains. These fees are typically charged as a percentage of assets, so their dollar value rises when markets advance, even if the actual rate for these services remains unchanged. Milan added that the recent surge in oil prices and corresponding increases in gasoline costs related to the Iran conflict are not a major concern. He said, "Typically, the Fed does not react so strongly to rising oil prices. Oil price increases boost headline inflation, but this is often a one-time shock. Core inflation, which excludes energy prices, is a better predictor of medium-term inflation trends than headline inflation." Since his nomination to the Federal Open Market Committee by President Trump last September, Milan has dissented at every FOMC meeting he has attended. Regarding the three rate cuts, he preferred larger 50-basis-point reductions instead of the 25-basis-point cuts approved by the committee. In January, when the FOMC voted against a rate cut, Milan expressed his preference for a 25-basis-point cut. When asked if he would dissent again, he said, "I hope not, but it depends on my colleagues. I hope we vote to cut rates." Milan was appointed to fill the remainder of the term of Adriana Kugler, who resigned in August 2025. That term expired this January, but Milan continues to serve until a successor is confirmed. Trump has nominated Kevin Warsh for the Fed Chair position, who would eventually succeed current Chair Powell, whose term expires in May. Milan said, "I will attend the meeting in a few weeks, and after that, I will take things one step at a time."
Comments