Federal Reserve Governor Michelle Bowman: A government shutdown will not affect my view of the U.S. economy, and a 50 basis point rate cut should occur in December

On Monday, Federal Reserve Governor Stephen Miran stated that he supports further interest rate cuts to prevent a future weakening of the U.S. economy.

In an interview with CNBC, Miran insisted that the pace of rate cuts should be faster than the traditional 25 basis points each time. He once again advocated for a 50 basis point cut, as he did in the previous two Federal Open Market Committee (FOMC) meetings, while also stating that at least a 25 basis point cut should be made. Miran said:

"Of course, nothing is certain. Between now and the meeting, we may see new data that could change my view. But unless new information leads me to adjust my forecast, I still believe that a 50 basis point cut is appropriate, as I did before, but the minimum should be 25 basis points."

Despite Miran's call for a more aggressive rate cut, the FOMC chose to cut rates by 25 basis points in both the September and October meetings. Miran voted against both decisions, with no other officials siding with him. Kansas City Fed President Jeffrey Schmid also voted against in October, but his reasoning was that he wanted no rate cuts at all.

Although there were only two dissenting votes in the October meeting, several officials' public statements indicate significant internal disagreement within the committee.

Federal Reserve Chairman Jerome Powell also mentioned these disagreements in a recent press conference, emphasizing that whether to cut rates again in December is still undecided. Some officials are concerned that inflation remains above the 2% target, thus taking a cautious stance on further rate cuts; while those in favor of continuing rate cuts worry about further weakness in the labor market.

Miran stated that failing to continue easing policy would be shortsighted:

"If you make policy based on current data, you're actually looking in the rearview mirror, because policy transmission takes 12 to 18 months to truly impact the economy. So you have to make policy based on where you think the economy will be in the next year to year and a half."

In the absence of official economic data during the U.S. government shutdown, policy-making faces uncertainty. Miran noted that existing data already shows weakness in both inflation and the labor market, which should lead the Fed to be more dovish than its September forecast of three rate cuts for the year.

According to CME Group's FedWatch tool, the market currently estimates the probability of the Fed cutting rates again in December at about 63%, a figure that has gradually declined since the October meeting