Fed’s Stephen Miran Sees Neutral ‘Quite a Ways Below’ Current Policy

Monetary Policy Stance - The Fed is considered too restrictive, with neutral rates significantly below current policy [1] - Maintaining a restrictive policy for an extended period risks causing an economic downturn [2][16] - Financial markets are influenced by various factors beyond monetary policy, including technological advancements [4][5] - It's a mistake to automatically infer the stance of monetary policy solely from financial conditions [7] - Housing market conditions are tighter and have a greater impact on the economy's cyclical position than the stock market or credit spreads [8] - Policy passively tightened through 2025 due to shocks driven by economic policies outside the Fed, pushing neutral rates higher last year and lower this year [9][10][14] Neutral Rate and Economic Factors - Population growth rate is a major driver of neutral rates, experiencing 30 years' worth of change in only three years [11][12][13] - Changes in neutral rate accelerate over time, impacting the stance of monetary policy [14][15] Data Dependency and Economic Forecasts - Being excessively data-dependent makes the analysis backward-looking; forecasts should be prioritized [23] - Confidence in forecasts is high due to known shocks like population growth, minimizing the need for data dependency [24] - Alternative data on the labor market indicates a continual ebbing of demand, signaling that policy is too tight [27][28] Private Credit Market - Distresses in private markets suggest financial conditions have been tighter than perceived [9][31] - Uncorrelated credit problems can indicate a restrictive monetary policy [33][34]