【U.S. Rate Cut】Federal Reserve Board Member Mullan: Iran conflict will not change the need for rate cuts; reiterates that there should be 4 rate cuts this year

Federal Reserve Board member Stephen Miran, who has consistently supported large rate cuts, believes that the risks from the Iran conflict have not changed the Fed’s need to continue cutting rates this year. He expects inflationary pressures to ease and the labor market to remain at risk, reaffirming that the Fed should cut rates four times this year, totaling a 1% reduction, to reach a roughly neutral level.

Currently, the situation is different from the 2022 Russian invasion of Ukraine.

Miran states that the Iran conflict has led to higher oil prices, pushing up overall inflation, but there is limited evidence that it has significantly increased core inflation. Given the current circumstances, it is difficult to be optimistic about the direction of monetary policy.

“The current situation is different from 2022 when Russia’s invasion of Ukraine caused a surge in global oil and other commodity prices, intensifying broader inflationary pressures. Currently, monetary tightening and fiscal policies are less stimulative than before, which reduces the risk of persistent inflation.”

Miran notes that the Fed should not ignore the gradual weakening of the labor market over the past two years. There is still evidence indicating that the labor market needs support from monetary policy, such as recent difficulties faced by new university graduates in finding jobs.