The Fed’s current monetary policy settings threaten U.S. economic growth, which has been “supported” by a series of Trump administration policies, including tax cuts, Fed President Stephen Milan said Thursday while reiterating the need for further interest rate cuts.
“I think the biggest risk to the economy is that we misunderstand how tight monetary policy is,” Millan said at a Dallas Fed event, adding that he didn’t think there was an inflation problem.
“It’s hard to worry about inflation because very low shelter inflation can offset much higher inflation in other parts of the index,” Milan said.
“As long as we remain indifferent about inflation, I think it makes sense to continue trying to underwrite the labor market with more accommodative monetary policy, especially as supply expands faster than demand and the economy is able to grow without causing inflation.”
Before his appointment to the central bank, Mr. Millan served as a White House economic adviser and was one of the Fed’s biggest supporters of easy monetary policy. He advocated deeper rate cuts than the Fed actually achieved in each of the previous three policy reviews last year, and opposed Fed policymakers in January when they voted 10-2 to keep rates in their current range of 3.50-3.75%.
Dallas Fed President Rory Logan, the organizer of the event where Milan spoke, opposes further rate cuts.
Logan believes the Fed’s policies have little effect on slowing the economy, and is concerned about inflation remaining higher than the labor market. He did not comment Thursday on his economic views or the outlook for monetary policy.
(Reporting by Ann Safir; Editing by Jacqueline Wong and Sri Navaratnam)
