Fed Governor Miran on Why Inflation Fears Are Overstated
Fed Governor Miran discusses his dissent at the January FOMC meeting, arguing that inflation fears are overstated due to measurement quirks and transitory oil shocks, while positive supply shocks from AI and deregulation are underappreciated. He advocates for returning monetary policy to neutral, as current restrictive settings are unnecessarily holding back an economy with a gradually cooling labor market. He also shares optimistic views on stablecoins as a vehicle for global dollar access and financial innovation.
Summary
Fed Governor Miran appeared at Blockworks' Digital Assets Summit to discuss his monetary policy framework, his dissent at the recent FOMC meeting, and broader economic trends including AI, deregulation, stablecoins, and the neutral interest rate.
On his FOMC dissent, Miran explained that he voted for a 25 basis point rate cut because he believes inflation has been less problematic than headline numbers suggest. He pointed to measurement quirks — particularly portfolio management services, which he says biases inflation readings upward by 30 to 40 basis points due to rising stock markets — as distorting the true picture. Meanwhile, he views the labor market as having been on a gradual cooling trend for three years, with increasing job-search difficulty for new entrants and longer unemployment spells, and believes monetary policy should provide additional support.
Regarding oil shocks and Iran, Miran argued that central banks should 'look through' oil price spikes because monetary policy operates on a 12-to-18-month lag, and oil's inflationary effect occurs rapidly and dissipates before policy can respond. He noted that forward inflation expectations — one, two, and three years out — are largely unchanged or even lower since the January FOMC meeting, suggesting no sustained inflationary bleed-through from the oil shock. He also dismissed the risk of a wage-price spiral given declining wage pressures in a cooling labor market.
Miran placed significant emphasis on positive supply shocks that he believes are underappreciated. He estimated that the current deregulatory wave would reduce inflation by roughly 0.5% per year, and cited a new Fed staff research paper by Cascaldi-Garcia and Iacoviello that independently estimated a 0.3% per year disinflationary drag from deregulation — calling both estimates 'very substantial.' He also highlighted AI as a durable positive supply shock that expands productive capacity. Using a 'car horsepower' analogy, he argued that the phrase 'running it hot' is imprecise because it assumes fixed supply capacity, whereas supply-expanding policies allow demand to grow without causing inflation.
On the neutral interest rate (R-star), Miran acknowledged AI pushes it higher through improved investment returns but argued that sharp declines in population and working-age population growth are a powerful countervailing force weighing rates down. He also pointed to a declining fiscal deficit — largely attributable to tariff revenues — as another factor suppressing the neutral rate. He described his neutral rate view as toward the bottom of his colleagues' range, around 2.5% to 2.75%.
For his rate path forecast, Miran said he raised his headline inflation projection for the year slightly to around 1.7% due to oil, but raised his policy rate projection by 50 basis points in the March SEP due to intervening inflation data — not oil. He stated that current policy is modestly restrictive at roughly 100 basis points above neutral and that the appropriate path is to return to neutral over the course of the year, neither accelerating nor restraining the economy.
On financial innovation, Miran expressed support for 'skinny master accounts' for stablecoins, noting the Fed has received significant public comment on the initiative and that he is excited for Governor Waller to advance it. On stablecoins broadly, he argued their biggest growth opportunity is not in developed markets with open capital markets, but in regions with capital controls or limited banking access, where stablecoins offer a new entry rail into the dollar system. He speculated that large-scale stablecoin adoption could echo the 'global savings glut' dynamic of the early 2000s, putting downward pressure on U.S. interest rates. On tokenized deposits, he acknowledged limited study but described them as an incremental improvement on existing bank services rather than a revolution. He closed by encouraging crypto founders and innovators to engage with Fed rulemaking processes by submitting public comments.
Key Insights
- Miran argues that measured inflation has been overstated by 30–40 basis points due to portfolio management services — essentially stock market gains — distorting CPI calculations, making the inflation picture less alarming than it appears.
- Miran contends that oil price shocks should be 'looked through' by central banks because their inflationary effects are front-loaded and dissipate well before the 12-to-18-month window in which monetary policy takes effect.
- Miran estimated that the current deregulatory wave will drag inflation down by approximately 0.5% per year, and cited a new Fed staff paper that independently arrived at a 0.3% figure using entirely different methodology — calling both estimates large and consistent within confidence intervals.
- Miran argues that the phrase 'running it hot' is analytically imprecise because it assumes fixed supply capacity; if supply expands through AI or deregulation, demand can accelerate without generating inflation.
- Miran views current monetary policy as modestly restrictive — approximately 100 basis points above his estimated neutral rate of 2.5%–2.75% — and believes it is unnecessarily holding the economy back given the macroeconomic backdrop.
- Miran argues that the most significant stablecoin growth opportunity lies not in developed markets but in regions with capital controls or underdeveloped banking systems, where stablecoins provide a new entry rail into dollar-denominated savings.
- Miran suggests that large-scale stablecoin adoption could replicate the dynamics of the early-2000s 'global savings glut' identified by Ben Bernanke, potentially exerting sustained downward pressure on U.S. interest rates.
- Miran argues that the sharp reversal in U.S. population and working-age population growth — from a massive spike in 2021–2023 to near-flat levels — is a powerful force suppressing the neutral interest rate, a dynamic he believes will reassert itself in coming years as it did pre-pandemic in the 'Japanization' discussion.
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