New Fed Governor Miran Says Policy Rate Too Tight; St. Louis Fed's Musalem Cautions Against Further Cuts

03:56 PM EDT, 09/22/2025 (MT Newswires) -- Newly appointed Federal Reserve Governor Stephen Miran said Monday that the central bank's policy rate should be two percentage points lower than where it currently is, while St. Louis Fed President Alberto Musalem cautioned against further rate cuts.

The Fed reduced its benchmark lending rate by 25 basis points to a range of 4% to 4.25% last week and signaled further reductions as it saw increased downside risks to employment. Miran, who was nominated by President Donald Trump following former Fed Governor Adriana Kugler's resignation in August, preferred a 50-basis-point cut at the meeting.

In remarks prepared for delivery at the Economic Club of New York, Miran said that the monetary policy is "very restrictive."

"I believe the appropriate fed funds rate is in the mid-2% area, almost 2 percentage points lower than current policy," he said. "Leaving policy restrictive by such a large degree brings significant risks for the Fed's employment mandate."

Separately, Musalem said he supported the Fed's decision last week "as a precautionary move" to support the labor market.

"The stance of monetary policy now lies between modestly restrictive and neutral, which I view as appropriate," he said in remarks prepared for a Brookings Institution event. "However, I believe there is limited room for easing further without policy becoming overly accommodative."

Musalem said financial conditions are supportive of economic activity, but looking through direct one-time effects of tariffs on inflation could risk price stability.

"While providing insurance against labor market weakness, I believe that monetary policy should continue to lean against persistence in above-target inflation, whether it materializes from the impact of tariffs, lower labor supply growth, or for other reasons," he said.

MT Newswires does not provide investment advice. Unauthorized reproduction is strictly prohibited.