Federal Reserve Board member Stephen Miran stated that due to disappointing inflation data since officials issued their last forecast in December, he has raised his prediction for the interest rate level at the end of this year by 0.5 percentage points.
Miran said at an event in New York on Wednesday: "I have raised my policy interest rate forecast by 0.5 percentage points, not because of oil and Iran issues, but because of the inflation data we have received."
He referred to the economic forecasts released by policymakers after last week's FOMC policy meeting. "This brings my forecast closer to neutral levels."
Milan voted against the Federal Reserve's decision to maintain interest rates at the March 18 meeting, as he preferred a 25 basis point cut. Officials acknowledged that the uncertainty surrounding the economic impact of the Iran war has intensified, and Federal Reserve Chairman Jerome Powell stated that policymakers hope to see further progress on inflation.
Milan stated that a cumulative rate cut of 1 percentage point this year is still appropriate to adjust interest rates to a neutral level for the economy.
He stated: “I don't think the economy needs monetary policy to hit the gas pedal to accelerate growth. But I also don't think it needs to hit the brakes to suppress the economy. The current policy is slightly tight and is dragging on the economy.”
As the effects of the Iran war begin to manifest, Wall Street is downgrading its forecasts for the U.S. economy this year, raising predictions for inflation and unemployment, and increasing the likelihood of a recession.
Goldman Sachs stated that due to the surge in oil prices, the risk of a U.S. economic downturn in the next 12 months has risen to 30%, and it predicts that the unemployment rate will climb from 4.4% in February to 4.6% by the end of 2026. Several companies indicated that this year's inflation rate will approach 3%, instead of 2%, which will erode disposable income and limit hiring.
As the impacts of Trump's tariffs gradually fade, tax cut stimulus measures are beginning to take effect, and 2026 was supposed to be a strong year. Now economists say that even if the fighting ends quickly, the damage already caused will keep the U.S. economy in a weak position, and job seekers and low-income consumers will continue to struggle.
Nancy Vanden Houten, chief U.S. economist at Oxford Economics, stated: “Due to this war, many elements of the economy will become weak. The impact is very obvious and very fast. You just have to drive past your local gas station.”
Rick Rieder of BlackRock also reiterated his view that the Federal Reserve should cut rates, shedding speculation about interest rate hikes related to the Iran war.
Reed, a senior official in BlackRock's bond market, said in an interview in Dallas: “Small businesses, young people, and low-income groups are indeed being hurt by these interest rates.” Volatile energy prices may provide some justification for a slowdown in the pace of rate cuts, but Reed stated that the Federal Reserve should still take swift action to lower rates.
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