Federal Reserve Governor Stephen Miran delivered a pointed message this week: the official inflation numbers paint a worse picture than reality, and the central bank risks hurting workers by dragging its feet on interest rate reductions.
Speaking at Columbia University, Miran laid out how distortions in measurement—especially lagging shelter costs and oddities in service pricing—make price pressures look stronger than they are. Strip those out, and underlying inflation sits below 2.3 percent, close enough to the Fed’s 2 percent goal.
“Keeping policy unnecessarily tight because of an imbalance from 2022, or because of artifacts of the statistical measurement process, will lead to job losses,” Miran said.
Shelter costs, a big driver in recent reports, come from old supply shortages that have long passed. New rent data shows tiny increases, setting up for a drop in that category soon.
“We must be thoughtful in considering genuine underlying inflationary pressures,” Miran said. “Excess measured inflation is unreflective of current supply-demand dynamics.”
Miran also took aim at the idea that the administration’s tariffs are pumping up prices. He ran through theory, data, and past central bank practice to show tariffs mostly hit foreign exporters, not American buyers. At worst, any bump to consumer prices stays small and short-lived—maybe 0.2 percent, what he called “noise.”
“If tariffs are the driver of recent inflation, then one would expect import-intensive core goods to see substantially more inflation,” Miran said. “In fact, total core goods prices have risen at approximately the same rate as import-intensive goods since the end of last year.”
U.S. goods price rises match those in Canada and the UK, run a bit above the EU, and fall below Mexico. “The U.S. doesn’t stand out in any direction,” he said.
On how tariffs work, Miran pointed to America’s huge trade deficit: foreign sellers have little choice but to eat most of the cost, since they can’t easily replace U.S. buyers.
He knocked down older studies claiming big pass-through to consumers, noting they missed tricks like rerouting shipments to dodge duties.
“These studies suffer from bias from trade rerouting and de minimis exemptions,” Miran said.
Central banks traditionally ignore one-time price jumps from things like taxes or tariffs, focusing instead on ongoing supply-demand mismatches.
“The standard practice for central bankers is to ‘look through’ a transient shock, as a one-time increase in the price level differs from a persistent shift to inflation,” Miran said.
Even if some costs get passed on early, competition and shifts in supply chains should bring prices back down later.
Miran admitted uncertainty on what’s really behind sticky goods prices right now—could be random noise, pandemic aftershocks, or longer-term reshoring for security reasons.
“I accept I don’t know what’s driving higher goods inflation currently,” Miran said. “Pretending we have more knowledge than possible will stymie our understanding of reality.”
He flagged problems in how services get priced, like portfolio management fees that shot up in Fed data because of rising asset values, even as real industry fees dropped.
“If PCE had instead matched industry data with a 6 percent decline, core PCE would have been about 40 basis points lower than officially reported,” Miran said. “Yet here we are, keeping interest rates too high because of the phantom inflation of portfolio advisory fees.”
With the labor market showing cracks and no real inflation threat, Miran wants faster cuts to get policy back to neutral ground. Holding rates high over faulty readings could kill jobs needlessly, and those losses hit hard and fast.
The Fed just cut rates again last week but hinted at caution ahead. Miran stands out as pushing harder for relief, warning that tight money lingering too long serves no one.
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