The US economy could fall into a recession if the Federal Reserve does not continue cutting interest rates into 2026, according to Governor Stephen Miran.
US Federal Reserve Governor Stephen Miran has warned that the economy could fall into a recession unless interest rate cuts continue into 2026.
In an interview with Bloomberg on Monday, Miran said he did not foresee an economic downturn in the near term but rising unemployment should prompt the Fed to keep cutting rates.
“If we don’t adjust policy down, then I think we do run risks. The unemployment rate has poked up potentially above where people thought it was going to go. And so we’ve had data that should push people in a dovish direction,” said Miran.
The unemployment rate rose to the highest level in four years to 4.6 per cent in November, according to the Labour Department’s data.
Since September, the Fed has cut rates by 75 basis points. While rate cuts can spur growth and support job creation, they also risk fuelling inflation. That was why the central bank resisted cutting rates for months despite pressure from President Donald Trump.
Miran said there was less need for a half-point cut at the next Fed meeting at the end of January.
“You sort of get into territory where you can start micromanaging instead of big cuts. And I don’t know whether we’re here yet, or it would still take a couple more cuts to get there,” said Miran.
Trump appointed Miran as one of the seven Fed governors after the abrupt resignation of Governor Adriana Kugler in August. He has served at the Fed alongside his role as head of the White House Council of Economic Advisers, diluting the independence the Fed has maintained for decades across administrations.
Unemployment and inflation make Fed’s choice tricky
While unemployment has risen to its highest point in four years, there are doubts over whether rate cuts could do more harm than good.
After the Labour Department’s data was released, Heather Long, chief economist at Navy Federal Credit Union, said the economy was in a “hiring recession”.
“The US economy is in a hiring recession. Almost no jobs have been added since April. Wage gains are slowing. 710,000 more people are unemployed now compared with November 2024,” said Long.
But several regional Fed presidents have expressed concerns about inflation, according to Bloomberg.
Inflation has, after all, continued to be above the Fed’s 2 per cent target.
In November, it rose to 2.7 per cent, although that was lower than the expected 3.1 per cent, as per CNBC.
End of Article