Federal Reserve Governor Stephen Miran stated that oil price volatility resulting from the U.S.-Israel conflict with Iran is not sufficient to alter his baseline expectation of four interest rate cuts within the year. He emphasized that the Fed should await more information before adjusting its policy outlook.
In a Monday interview with Bloomberg, Miran noted, "We should wait for all the information to come in before actually changing our outlook," adding that "it is still too early to form a clear judgment looking ahead over the next 12 months." His pre-conflict projection of four rate cuts this year remains unchanged.
The Middle East conflict has driven oil prices significantly higher, raising concerns that this could simultaneously create upward pressure on inflation and hinder economic growth and the labor market. Last week, the Fed held its benchmark interest rate steady for the second consecutive time, with Chair Jerome Powell stressing that officials need to see further progress on inflation. Miran dissented from that decision, advocating for a 25-basis-point rate cut.
Although Miran acknowledged that persistently high oil prices could eventually transmit to broader goods and services prices, his current remarks indicate that short-term geopolitical shocks are not yet sufficient to prompt a reassessment of this year's easing path.
**Fed Holds Steady as Miran Dissents**
At last week's policy meeting, the Federal Reserve left interest rates unchanged for the second time in a row, with policymakers citing heightened economic uncertainty due to the U.S.-Israel conflict with Iran as justification for maintaining the current rate. Following the meeting, Powell underscored that officials need to see further cooling in inflation before paving the way for rate cuts.
Miran cast a dissenting vote at this meeting, arguing in favor of a 25-basis-point reduction. This stance aligns with his overall dovish position—while most committee members opted to wait, he has shown a preference for advancing easing measures sooner.
**Oil Price Shock and Inflation Spillover Risks**
The rapid rise in oil prices triggered by the Middle East conflict has renewed market concerns about the inflation outlook. Miran acknowledged that if oil prices remain elevated for an extended period, there is a risk of spillover into other goods and services, leading to broader inflationary pressures.
However, he currently categorizes this scenario as a potential risk rather than part of his baseline forecast. In his view, hastily adjusting the policy path amid high geopolitical uncertainty does not align with the principles of prudent decision-making. Instead, the Fed should remain patient and wait for greater clarity before making further assessments.
