US Federal Reserve member Stephen Miran described the employment data showing a rise in the number of workers in US companies during October as a welcome surprise, while at the same time stressing the need to cut interest rates further.
Private sector employment in the United States saw a larger-than-expected increase in October, a further sign that the labor market is recovering from the job losses suffered in September.
Private human resources firm ADP reported Wednesday that companies added 42,000 jobs during the month, while economists had expected an increase of 32,000 jobs.
In addition to the October increase, September's data was revised to show a loss of 29,000 jobs instead of a decrease of 32,000 jobs.
The ADP report gained additional importance in light of the ongoing longest government shutdown in US history, which delayed the release of official economic data, making investors rely on private sector indicators as a primary source for assessing the economic situation.
Miran reiterates his call for a deeper interest rate cut
In an interview with Yahoo Finance on Wednesday, Miran explained that the US economy continues to show limited employment indicators and modest growth prospects, along with a slowdown in wage growth, which points to weak labor demand from a cyclical economic perspective. He added that these factors combined support the idea that current interest rates are too high.
Miran is one of the voices calling for a more flexible monetary policy, as he contradicted the Federal Reserve’s decisions twice in a row last September and October, when the central bank cut the interest rate by a quarter of a percentage point, while he called for a full half point cut to support the labor market and economic growth.
The Federal Reserve decided last week to cut interest rates again by a quarter of a percentage point due to continued concerns about the weak labor market. However, its chairman, Jerome Powell, stated that a further cut in December is not yet certain, indicating a division within the Fed regarding the pace of monetary easing.
Disagreement within the Federal Reserve regarding inflationary risks
In contrast, several Federal Reserve members expressed concern that accelerating interest rate cuts would keep inflation rates high, arguing that monetary policy should remain cautious so as not to weaken price control.
But Miran believes the current policy is still too restrictive, explaining that continuing with the tightening approach carries unnecessary risks to economic growth. He added that stability requires a return to a more balanced approach that restores activity to its normal trajectory.
Miran, who was recently appointed to the Federal Reserve Board, indicated that it is still considered a reasonable move for the bank to continue cutting interest rates, including at the most recent meeting scheduled for December 9 and 10.
Miran: I want to reach critical neutrality more quickly.
Miran asked, “Has anything fundamentally changed?” He explained that the lack of official data due to the government shutdown showed no signs of rising inflation, while the labor market appeared generally stable.
Miran concluded by saying that the disagreement between him and his teammates is not about the ultimate goal, but about the speed at which it is reached, adding: The destination is the same, but I just want to get there faster than the others.
Since the Fed’s last meeting, several voices within the council have begun to express increasing reservations about a new interest rate cut in December, amid continued concerns about inflation and the difficulty of assessing the economic situation in the absence of official data.
