Federal Reserve Governor Stephen Miran said Monday that the central bank should avoid making policy shifts in response to short-term developments arising from the war involving the US and Israel in Iran. He argued that officials need to wait for a fuller information set before altering their outlook.
"We should wait for all the information to come in before really changing our outlook," Miran said in an interview on Bloomberg Surveillance. "And I think it's just still premature to have a clear view about what this is going to look like as you look 12 months out."
Officials at the Fed are weighing the repercussions of the conflict, which has pushed oil prices sharply higher. That move in energy markets introduces the potential for upward pressure on inflation while also exerting a drag on economic growth and the labor market.
Miran explicitly recognized a risk that sustained elevated oil prices could ripple through to other goods and services. Even so, he said his pre-war projection of four rate cuts for the year has not changed.
At its meeting last week, the Federal Reserve left its benchmark interest rate unchanged for a second consecutive time. Policymakers highlighted heightened economic uncertainty stemming from the conflict as a factor in their deliberations. Fed Chair Jerome Powell emphasized the need for additional progress in bringing down inflation.
Governor Miran did not concur with the decision to keep rates steady. He registered a dissent, favoring a quarter-point reduction in the policy rate.
Separately on Monday, Federal Reserve Bank of Chicago President Austan Goolsbee offered a view that underscored the range of possible policy paths. He said the central bank could pivot toward further rate cuts or, alternatively, raise rates depending on how the war influences economic outcomes.
"We could be back to the environment with multiple rate cuts for the year if inflation behaves," Goolsbee said in a CNBC interview. "I could see circumstances where we would need to raise rates if it was going a different way, and inflation was getting out of control."
Context for markets and sectors
- Energy markets are directly affected by the conflict-driven rise in oil prices, with downstream implications for inflation readings.
- Labor markets and overall economic growth face downside pressure if energy-driven costs restrain activity.
- Financial markets and interest-rate sensitive sectors will monitor whether higher energy costs translate into broader inflationary persistence that could alter the Fed's path.