"New Federal Reserve News Agency": Trump's nomination of Milan stirs consensus at the Federal Reserve, escalating policy differences into institutional conflict

Renowned financial journalist Nick Timiraos, known as the "New Federal Reserve Correspondent," wrote that Trump plans to nominate Stephen Miran to the Federal Reserve Board. If the nomination is successful, he will bring a distinctly opposing voice to traditional views within the Federal Reserve, particularly regarding the impact of tariffs on inflation and economic growth.

Most Federal Reserve officials are concerned that tariffs will weaken the economy and drive up prices, leading to a dilemma: whether to cut interest rates to stimulate the economy or maintain rates to curb inflation. Miran, however, believes this view is fundamentally misguided: he argues that tariffs will boost the economy with little effect on prices, which would provide room for the Federal Reserve to restart the interest rate cuts that were paused earlier this year.

Timiraos points out that the question is: Is Miran's argument persuasive enough to influence the thinking of the entire Federal Open Market Committee (FOMC)? Or, if signs of a weak labor market are sufficient to prompt the Federal Reserve to resume rate cuts, does his viewpoint still matter?

Timiraos also notes that Miran's disagreements are not limited to policy. Miran directly questions the institutional legitimacy of the Federal Reserve itself, criticizing those Federal Reserve officials who claim to be "non-political" as actually being "politically driven," and he vehemently attacks the Federal Reserve's decision-makers for suffering from what he calls "tariff confusion syndrome." In a paper last year, he even argued that all senior Federal Reserve officials should be "freely dismissed" by the White House.

Timiraos states that if appointed, Miran would become a staunch ally of Trump at the Federal Reserve, bringing Trump's stance into the Federal Reserve's meeting room and challenging the institution's consensus-driven culture and its influential research team. Currently, the Federal Open Market Committee has 19 policymakers involved in interest rate decisions, of which 12 have voting rights. Individual members only have actual influence if they can persuade their colleagues.

Miran holds a Ph.D. in economics from Harvard University and currently serves as the chair of the White House Council of Economic Advisers. Trump stated on Thursday evening that he would nominate Miran to fill a newly vacated seat on the Federal Reserve Board, which was previously held by Adriana Kugler, who announced her resignation last week, with her term ending in January next year.

Trump also indicated that he plans to appoint another person to fill this seat, who may potentially succeed Powell as Federal Reserve Chair. The nomination of Miran also gives Trump more time to observe how other candidates defend his policy positions on television—or, like Miran and Waller, actually support them in interest rate votes.

Miran's "Contrarian View"

Miran's "contrarian view" revolves around two main points: first, that tariffs will not significantly affect overall price levels or consumers' expectations of future inflation; second, that Trump's macroeconomic policies are overall "highly disinflationary."

In 2019, the Federal Reserve cut interest rates due to concerns about economic growth, at a time when inflation levels were low. However, now the Federal Reserve is more cautious, as inflation has been above its target for years.

Last fall, Miran stated that tariffs would not lead to price increases for related goods because a stronger dollar would offset the cost increases brought about by tariffs. However, this prediction has not materialized this year, as the dollar has depreciated against other currencies In an interview with the media on Thursday, Milan stated that the new trade barriers imposed by Trump have not brought "any significant price pressure at the macro level." Even if certain commodity prices experience short-term increases, the impact is only temporary, as service inflation, which dominates the consumer price index, remains moderate.

Currently, Milan's argument has not gained widespread support within the Federal Reserve, with only two officials appointed by Trump considering the possibility of interest rate cuts, as they believe the impact of tariffs is only temporary. Meanwhile, a few other officials have recently indicated that if the labor market continues to weaken, they may support rate cuts, as inflation is no longer the primary concern at that point.

Depth of Disagreement

Timiraos noted that although Milan's nomination stems from the Trump administration's opposition to Federal Reserve policy, it also highlights the depth of disagreement and how the Federal Reserve is being pushed toward a new trend: officials' votes are beginning to align more clearly along the political lines of the president who appointed them, rather than based purely on economic analysis.

Milan's criticisms are no longer limited to the policy itself. The initial technical disagreements regarding the transmission mechanism of monetary policy have evolved into a comprehensive questioning of democratic accountability.

Last fall, Milan vehemently criticized the Federal Reserve's decision to begin lowering interest rates from two-decade highs, stating that Federal Reserve officials were not taking seriously their commitment to bring inflation back to the 2% target.

He wrote on social media in September of last year: "I can’t think of anything more 'deep state' and more corrosive to democracy than these unelected officials of the Federal Reserve allowing for permanently high inflation—this clearly contradicts the mandate given to them by Congress to maintain 'price stability.'" He later stated that this remark was an "exaggerated expression."

Milan expressed confusion over the Federal Reserve's actions at that time, as they occurred less than two months before the presidential election, leading him to conclude that the Federal Reserve's actions were politically motivated—an accusation that Powell and most of his colleagues have firmly denied.

Now, in the context of Trump's push for interest rate cuts, Milan stated that he does not believe inflation will become a problem. He mentioned that his views on the policy trade-offs in inflation management have not changed, but economic policies have shifted, including the tax cuts and deregulation measures promoted by Trump.

In March of this year, during a written inquiry from the Senate regarding his appointment to the White House Council of Economic Advisers, Milan stated that he had predicted the Federal Reserve's interest rate hikes in 2022-2023 would trigger a recession, but this prediction was partially incorrect due to the Federal Reserve not tightening policy decisively enough and the U.S. Treasury's improper intervention in debt management