Fed Governor Miran Says Federal Funds Rate Should Be Below 3%

12:30 PM EDT, 09/22/2025 (MT Newswires) -- When factors such as immigration are taken into consideration, the federal funds rate should be below 3% today rather than in the current range of 4.00% to 4.25% set at the Federal Open Market Committee last week, Federal Reserve Governor Stephen Miran said Monday in his first speech in his new position.

Miran dissented last week from the FOMC's decision to lower rates by 25 basis points, preferring a larger 50-basis point reduction. He also forecasted an additional 125 basis points of reduction through the end of the year in the Summary of Economic Projections, putting the federal funds rate range at 2.75% to 3.0% at the end of 2026. The next lowest estimate was 75 basis point higher.

The need to lower rates rapidly, Miran explained in his speech, is that decreased immigration and changes in tax policy have pushed lower the neutral rate of interest, making the current nominal rate more restrictive by comparison.

Miran suggested that a reduction in illegal immigrants in the country will lower demand for housing, reducing housing costs that are a key reason for the elevated levels of overall inflation.

At the same time, Miran said that "relatively small changes in some goods prices have led to what I view as unreasonable levels of concern," in line with his previous comments that tariffs will not have a lasting impact on inflation.

"I believe the appropriate fed funds rate is in the mid-2% area, almost 2 percentage points lower than current policy," said Miran. "The Federal Reserve has been entrusted with the important goal of promoting price stability for the good of all American households and businesses, and I am committed to bringing inflation sustainably back to 2%. However, leaving policy restrictive by such a large degree brings significant risks for the Fed's employment mandate."

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