Fed Governor Milan Sticks to Rate Cut Stance Amid Inflation Concerns

Governor Milan Advocates for Rate Cuts Amid Fed Disagreements

New Federal Reserve Governor Milan said on Wednesday that he believes continued interest rate cuts by the U.S. central bank remain a “reasonable course of action,” including a possible further reduction at the final annual meeting scheduled for December 9-10.

In an interview with Yahoo Finance, Milan referenced prior policy expectations that indicated three rate cuts in 2025.

“The question then becomes: What’s changed?” he said.

Milan acknowledged the absence of official economic data due to the government shutdown, but he pointed to inflation data coming in lower than expected and the labor market maintaining a stable trend.

Notably, Milan dissented from the Fed's decision last week to lower the benchmark rate by 25 basis points, bringing the target range down to 3.75% to 4%. He favored a more substantial 50-basis-point cut instead. He was also a dissenter at the September meeting.

He asserted that his goal is to achieve a neutral policy stance, a level of interest rates that neither stimulates nor inhibits economic growth.

“Where is the core disagreement with my Fed colleagues? I would like to get to that destination faster than others,” Milan said. “Not that there’s a huge disagreement on the ultimate destination.”

Since last week's policy meeting, a growing number of Fed officials have expressed concerns about inflation and have sounded a note of caution about another cut in December.

Chicago Fed President Goolsbee told Yahoo Finance that he had not yet decided whether he would support a rate cut in December. Fed Governor Cook and San Francisco Fed President Daly also voiced similar views in separate speeches on Monday. Meanwhile, Kansas City Fed President Schmid stated that he dissented from the rate cut at last week's policy meeting.

This leaves Milan appearing somewhat isolated in pushing for further rate cuts.

“Anything can happen between now and December. There could be new information, surprises, shocks, things could come up that we haven’t anticipated,” he said. “But absent new information that would significantly change the outlook, I think continuing to move along the path we’re on is still a consistent and reasonable course of action.”

Private sector employment data released Wednesday did not alter Milan's view of the labor market.

Data from Automatic Data Processing (ADP) showed that job growth rebounded in October, with 42,000 jobs added during the month, compared to a decline of 29,000 jobs in September.

Milan called the figure a “welcome surprise,” but he noted that looking at the overall employment picture, the existing trends before the government shutdown are still continuing. He mentioned that jobs are growing moderately, wage growth is slowing, and there are signs that labor demand may not be as strong as it once was.

“All of that to me says that rates probably could be a little bit lower than where they are,” he said.

Milan Comments on Trump Tariffs Case

Milan also warned that a Supreme Court ruling that President Trump's tariffs imposed under economic emergency powers are unlawful could add uncertainty and slow down the economy.

“Anything that adds to the uncertainty in the tariff environment, the trade environment, can absolutely be a drag on the economy,” Milan said.

On Wednesday, Supreme Court justices questioned the broad authority Trump used to impose wide-ranging tariffs on numerous countries around the globe under the International Emergency Economic Powers Act during nearly three hours of oral arguments. The broad power has been used by the U.S. to reach a number of trade agreements and had collected nearly $200 billion in tariff revenues as of Sept. 30.

Milan noted that tariff revenue is equivalent to savings in the economy, and if national savings increase, that drives interest rates down.

“If that revenue goes away, then naturally you would assume that would have an effect on interest rates, and that’s important for monetary policy,” Milan said.