TLDR
- Stephen Miran warns trade tensions with China pose new risks to US growth.
- Miran calls for an extra 1.25 percentage points in Fed rate cuts this year.
- The FOMC is expected to consider another quarter-point cut in late October.
- Mortgage markets watch closely as rate changes affect lending and demand.
Rising trade tensions between the United States and China have prompted Federal Reserve Governor Stephen Miran to urge faster interest rate cuts. Speaking in Washington, Miran warned that renewed uncertainty from the trade dispute could slow economic growth and affect financial stability. His remarks came as China moved to restrict exports of rare earth materials, intensifying pressure on global markets and the U.S. economy.
Miran Urges Quicker Policy Response
At the CNBC Invest in America Forum in Washington, D.C., Miran said the recent breakdown in trade talks has increased downside risks for the U.S. economy. He noted that the Federal Reserve should respond quickly to balance the risks facing growth and employment.
“There’s now more downside risks than there was a week ago, and I think it’s incumbent upon us as policymakers to recognize that should get reflected in policy,” Miran said. He added that monetary policy remains too restrictive, leaving the economy vulnerable to external shocks.
Miran, who joined the Fed Board last month, has proposed rate cuts totaling 1.25 percentage points beyond the quarter-point reduction approved in September. He believes this approach would help move policy closer to a neutral stance that neither stimulates nor restricts growth. “If you hit the economy with a shock when policy is very restrictive, the economy will react differently than it would if policy was not as restrictive,” he stated.
Trade Dispute Raises Economic Concerns
The renewed trade dispute between Washington and Beijing has added to global economic uncertainty. The U.S. has threatened tariffs of up to 100% on Chinese imports, while China has announced new limits on exports of rare earth materials vital to technology and manufacturing.
These developments have increased volatility in financial markets and raised concerns about a potential slowdown in business investment. Miran said he had believed that trade uncertainty had eased earlier this year, but the latest developments show that “the Chinese are reneging on deals that were already made.”
Market analysts expect the Federal Open Market Committee (FOMC) to approve another quarter-point rate cut at its next meeting on October 28–29. Miran said two additional cuts by the end of the year “sound realistic,” aligning with the median projections from the Fed’s 19 policymakers.
Mortgage and Housing Market Outlook
The Fed’s policy path has drawn close attention from mortgage lenders and brokers. Lower interest rates usually translate to cheaper borrowing costs for homebuyers and higher refinancing activity. However, rising uncertainty from trade tensions could dampen consumer confidence and reduce demand for homes.
Mortgage professionals are watching how rate decisions influence lending rates and home affordability. While lower borrowing costs offer short-term relief, uncertainty about trade policy may cause borrowers to delay purchases or refinancing decisions. The link between rate policy and consumer sentiment remains crucial for the housing sector in the months ahead.
Ongoing Debate Within the Fed
Miran’s call for faster rate cuts has generated debate within the Federal Reserve. Chair Jerome Powell supports a gradual approach, favoring smaller moves to manage inflation and employment risks. In contrast, Miran argues that swift action is necessary to reduce the economy’s exposure to shocks from trade tensions and global slowdowns.
As the October meeting approaches, market participants will be watching for signs of consensus within the FOMC. The evolving trade situation with China, coupled with slowing global demand, will likely shape the Fed’s next steps in adjusting monetary policy.
