Federal Reserve Governor Stephen Miran has stated that recent trade tensions have amplified uncertainty regarding economic growth. He stressed the importance for policymakers to implement interest rate cuts promptly. Miran made these remarks at a CNBC event, noting that the downside risks have increased compared to the previous week, necessitating a policy response. He specifically highlighted the escalating trade policies between China and the US as introducing a significant new risk factor.
While Miran did not explicitly call for lower rates than previously advocated, he emphasised the urgency of achieving a more neutral policy stance swiftly. Businesses in the semiconductor supply chain are preparing for potential disruption as a result of President Trump’s threat to impose a 100 per cent tariff on China. This action followed China’s restrictions on rare-earth mineral exports, prompting the US to consider controls on critical software sales.
Even before the latest escalation, Miran supported lowering the Fed’s benchmark by an additional 1.25 percentage points by the end of the year. The median projection from the Fed’s 19 policymakers indicated expectations of two more quarter-point cuts in 2025. Miran stated that anticipating two more rate cuts this year “sounds realistic”.
The Fed’s current target rate stands at 4 to 4.25 per cent. Futures trading suggests a likely 25 basis point cut at the upcoming policy meeting this month, reflecting the market’s expectation of easing monetary policy in response to the growing economic headwinds.
