Federal Reserve governor Stephen Miran (CAS’05) (left) explained his unconventional views on inflation, tariffs, and other economic questions in a podcast at WBUR’s CitySpace, hosted by Curt Nickisch (Questrom’13). The podcast was hosted by the Questrom School of Management’s Mehrotra Institute for Business, Markets & Society. Photo by Jackie Ricciardi

Politics

Federal Reserve Governor, and Alum, Stephen Miran, in Visit to BU, Says Inflation Is Under Control

Economist explained his dissent from other governors in a WBUR CitySpace podcast interview Monday

The Federal Reserve stabilized the rise in prices a few years ago, but rolling prices back to their pre-pandemic levels would harm the economy, public concerns about affordability notwithstanding. Federal Reserve Board governor and Boston University alum Stephen Miran (CAS’05) made that case February 9 at his alma mater.

“The job of the Fed is to keep prices stable. It’s not to reduce the price level,” Miran, who also chaired the White House Council of Economic Advisers (CEA) until last week, said before a podcast audience at WBUR’s CitySpace. 

“It is true that prices are higher than they were before the pandemic,” he said. “It is true that people still are unhappy with the prices of certain goods, but those goods are no longer really changing prices [upward] very much.” While Americans are “still dealing with the scars” of those, “that is not a good excuse for asking people to lose their jobs,” which would result from deflation and falling prices, he argued.

“If we were to cause a massive recession to get the price level down,” he said, “it would improve affordability, but it actually would hurt the economy a lot, because we tighten so much and lots of people lose their jobs.”

Miran’s comments came during an interview with Curt Nickisch (Questrom’13) for the latter’s WBUR podcast Is Business Broken? produced by the Ravi K. Mehrotra Institute for Business, Markets & Society at BU’s Questrom School of Business. Miran addressed topics from his “out-of-consensus” support for tariffs to his belief that the Fed has too big a role in the markets, thanks to its buying spree of government bonds and private assets to boost liquidity during the 2008 financial crisis and the COVID-19 pandemic’s economic downturn.

Miran’s term as one of 12 governors on the Fed’s interest rate–setting committee expired January 31; he continues to serve pending a replacement. He went on leave from the CEA when President Donald Trump nominated him to the Fed last September to fill another governor’s unexpired term. Miran resigned from the CEA last week, fulfilling a pledge during his Senate confirmation to the Fed that he would not continue as chairman if his Fed term had to stretch beyond its expiration. 

Miran’s CitySpace talk followed a January vote in which he was in the minority of a 10-2 Fed decision to leave interest rates unchanged. Miran and another governor appointed by Trump voted for a quarter-point cut. It was the fourth consecutive meeting where Miran urged rate cuts. The Fed’s key rate stands at 3.6 percent; lowering it can reduce the cost of borrowing for mortgages, car loans, and businesses.

The majority argued that “inflation remains somewhat elevated,” raising concerns that a rate cut could further fuel higher prices. But at CitySpace, Miran argued that apparently elevated inflation results from measurement errors that overestimate price increases.

For example, lag time in measuring the increased costs of housing means that today’s inflation measure actually includes prices from 2021-2023, “a historically anomalous real estate market. If you look at market rents, they’ve been running around one percent [inflation] for a couple of years now,” Miran noted. “Renewal leases are now at about the same level where fresh new leases are, which, altogether, to me indicates that housing inflation is going to normalize, I think, pretty quickly this year.”

On tariffs, he said that Trump’s policy hadn’t triggered the inflation mainstream economists feared. Those economists attribute that to Trump’s backing away from some of the stiffest tariffs he proposed, exempting some countries from the levies, and companies bulking up their inventories with imported goods between Trump’s election and his inauguration, duty-free, in order to have plenty on hand once new tariffs hit.

But Miran said he compared the cost of core goods (minus typically volatile food and energy prices) overall to those of imported core goods. “If you thought tariffs were a very material driver of inflation, you’d expect imported core goods to be experiencing significantly higher inflation than overall core goods,” he said, “and you don’t see that.” Nor are American goods rising in price appreciably more than other nations’ goods, another expected result if tariffs drove inflation, he added.

Trump pressured the Fed last year to cut interest rates, to no avail. In January, he announced a criminal probe of Jerome Powell, the Fed chair, who publicly called the inquiry retribution over the rate disagreements. As his final question, Nickisch asked Miran, “Are you concerned about the Fed’s independence? You could certainly face some apparent challenges from the current administration. And you’re also a dissenting view.”

While declining to comment on policy by non-Fed officials, Miran said, “The best thing that the Fed can do, in my view, is to just stick to the straight and narrow. Just stick to interest rate policy. … Don’t politicize yourself. Don’t exploit monetary independence in order to try and go into non-monetary areas of the economy like regulations or climate.” 

The Fed last year retreated from a global effort by central banks to include risk from climate change in their efforts to police financial systems.

The WBUR interview was livestreamed by Bloomberg and Yahoo Finance. Earlier in the day, Miran had held several meetings with students and had lunch with BU President Melissa Gilliam, students, and faculty.