Fed’s Miran Resigns After 6 Dissents, Warns on ‘Fake’ Inflation

Federal Reserve Governor Stephen Miran, who dissented at all six meetings he attended, submitted his resignation Thursday, warning that flawed inflation metrics are causing the central bank to pursue an overly tight monetary policy. His departure is effective upon the swearing-in of Kevin Warsh, who was confirmed by the Senate as the next Fed Chair.

"If the Federal Reserve doesn't adjust for these errors, it will run unemployment higher than it has to, fighting fake rather than real inflation,” Miran wrote in his resignation letter. “I have argued forcefully against this dynamic.”

Miran’s departure follows the Senate’s confirmation of Kevin Warsh as the next Fed Chair. Since his appointment in September, Miran consistently voted against the Federal Open Market Committee's decisions, first pushing for larger rate cuts and later for a 25-basis-point cut when the committee opted to hold rates steady.

Miran's exit solidifies a leadership transition at the Fed that could pivot its approach to inflation measurement and balance sheet policy. His pointed critique raises the stakes for incoming Chair Warsh to address potential distortions in inflation data, which Miran argued could be artificially inflated by factors like AI-driven stock gains and portfolio management fees.

A Lone Dove's Dissent

Appointed by President Trump to serve the remainder of a term, Miran established himself as the FOMC's most dovish member. At every meeting since last September, he cast a dissenting vote. He initially favored cutting rates by twice the 25-basis-point increments the committee approved and later advocated for a quarter-point cut this year when his colleagues voted to keep the federal funds rate in its 5.25% to 5.50% range.

Miran argued that the so-called neutral rate of interest is considerably lower than current levels and that the Fed needed to move more quickly to that posture. He also voiced support for shrinking the Fed's $6.7 trillion balance sheet.

Inflation Measurement in Focus

In his letter, Miran detailed his concerns that the Fed was failing to account for "nonmonetary forces" that act to reduce inflation, such as lower immigration and deregulation. He stressed that monetary policy operates with a significant lag and that officials must be more forward-looking.

He highlighted specific biases in inflation data construction, noting that portfolio management fees and quality issues in software could be distorting inflation readings higher as artificial intelligence fuels stock market gains. “While there's always measurement error in inflation, a severe problem arises when those errors grow over time," he wrote.

Miran expressed confidence in his successor, stating he was "excited about changes Chairman-designate Kevin Warsh and the Federal Reserve may take in areas such as communications policy, balance sheet policy, and keeping the Federal Reserve to its narrow mandate."

This article is for informational purposes only and does not constitute investment advice.