New Federal Reserve Nominee Stephen Miran Advocates for Reduced Fed Independence
Potential resistance encountered for Trump's nominee at the Federal Reserve
Stephen Miran, a distinguished economist and supporter of President Donald Trump's economic agenda, has been nominated to the Federal Reserve's Board of Governors. This comes after Adriana Kugler's resignation with six months left in her term.
Despite being a traditional nominee, having served as the head of the Council of Economic Advisers, Miran holds a skeptical and unconventional view of the Federal Reserve's independence. He advocates for significantly reduced Fed autonomy and more direct political oversight.
In a contrasting view, current Fed Chair Jerome Powell and most Fed members support a more traditional model of central bank independence. They emphasize long-term monetary policy goals insulated from short-term political pressures.
Here's a comparison of their views:
| Aspect | Stephen Miran's View | Jerome Powell & Other Fed Members' View | |-------------------------------|--------------------------------------------------------|----------------------------------------------------| | Fed Independence | Fed should have less independence, under more political control | Fed should remain independent to ensure long-term monetary stability | | Fed Budget Control | Fed's budget should be subject to Congressional appropriations | Fed controls its own budget to preserve independence | | Term Length and Removal Power | Shorter terms; governors serve at president’s will, can be dismissed | Longer staggered terms; more insulation from political dismissal | | Policy Debate and Dissent | Encourages more open debate and dissent among Fed members | Prefers consensus-driven decisions with less public dissent | | Relationship with Executive Branch | Prohibits Fed governors serving in executive branch for 4 years post-term to avoid revolving door | Less strict on post-term restrictions; informal ties exist but independence is maintained |
Miran argues that the Fed's independence is overstated in practice due to extensive informal ties and personnel overlap with the Treasury and executive branch. He proposes reforms to subject the Fed's budget to Congressional appropriations, shorten governors' terms, increase White House control to dismiss governors at will, and prohibit Fed governors from joining the executive branch for four years after their term.
This approach threatens to fundamentally reshape the Fed’s institutional independence and governance, a stance that concerns many analysts who worry this could politicize the Fed and impair its ability to manage economic policy effectively.
If confirmed by the Senate, Miran would voice his economic views, including his stance on tariffs, and influence the Fed's decisions on interest rates. Building a consensus among the Fed's rate-setting committee, which consists of 12 voting members, will be crucial for Miran if he wants to align the Fed's decisions with Trump's views.
However, Fed officials have generally expressed concern that tariffs could contribute to inflation, a viewpoint that differs from Miran's. Fed Governor Christopher Waller and Fed Vice Chair for Supervision Michelle Bowman, Trump appointees, have argued that tariffs could have a limited effect on prices.
Economists polled by data firm FactSet expected an annual gain of 2.8% in July. Consumer prices in July rose 2.7% from a year earlier, according to the latest Consumer Price Index data.
Miran's nomination comes at a time when the labor market is showing signs of sputtering, potentially leading the Fed to consider cutting interest rates next month. Daniel Altman, an economist and writer, stated that there are still Fed governors concerned about inflation.
In his Manhattan Institute paper last year, Miran argued that Fed officials should be subject to at-will dismissal from the president, a stance more in line with Trump's views on interest rates than with Powell's view of a politics-free Fed. Unlike most mainstream economists, Miran believes that Trump's widespread tariffs on US trading partners won't stoke inflation.
In his CNBC interview, Miran softened his stance on the Fed's independence, stating that independence is of paramount importance. However, his nomination has raised concerns about the potential politicization of the Fed and its ability to manage economic policy effectively.
[1] The Washington Post - "Stephen Miran's radical plan to reform the Fed" [2] Bloomberg - "Miran's Fed Reforms Threaten to Politicize the Central Bank" [3] The New York Times - "Miran's Plan for the Fed: More Political Control" [4] The Wall Street Journal - "Miran's Nomination Raises Concerns About Fed Independence"
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