US faces risk of recession if Fed doesn't cut rates, flags Governor Stephen Miran

Federal Reserve Governor Stephen Miran, on Monday, 22 December, cautioned that not cutting interest rates may heighten the risk of a recession in the US economy.

“If we don't adjust policy down, we do face a rising risk of a recession,” Miran said in an interview on Bloomberg Television.

He also addressed the short-term risks of recession and said, “I don't see a recession in the near term. The unemployment rate has poked up potentially above where people thought it was going to go. And so we’ve had data that should push people into a dovish direction."

Appointed by US President Donald Trump, Miran has advocated for larger cuts since joining the Board of Governors in September.

Miran mentioned that after policymakers have lowered rates three times by a total of 75 basis points since September, there is less need to cut rates by half a point at the upcoming Fed meeting at the end of next month, noting that he has not yet made a decision.

“You sort of get into territory where you can start micromanaging instead of big cuts,” the Fed governor said. “And I don’t know whether we’re here yet, or it would sort of still take a couple more cuts to get there.”

What's next for the Fed's rate decision?

The Fed reduced interest rates by a quarter point this month, but officials remain divided on the future approach, with most expecting only one more cut next year. Recent public statements suggest that most officials plan to keep rates unchanged in the coming months, awaiting a clearer economic outlook.

Several regional presidents have expressed concerns about inflation, which remains nearly a full percentage point above their 2% target. Additionally, unemployment has increased, heightening concerns about a steep decline in the employment market.

Will Miran stay beyond his Board term?

Miran also mentioned he is likely to stay on the central bank's Board of Governors beyond his term until the Senate confirms whoever President Donald Trump nominates as the next Fed chair.

"If nobody is ‍confirmed in ‌my seat by January 31, I ​assume that I will stay," he said.

Miran joined the Fed in September, appointed by Trump to serve the few remaining months of a 14-year board term following Adriana Kugler's unexpected resignation as a Fed governor in August. His term ends on January 31, but he may stay until the Senate confirms a successor.

Trump is considering whom to appoint to the Fed as a successor to Fed Chair Jerome Powell, whose term as the central bank's leader expires in May.