• Federal Reserve official advocates for larger interest rate cuts amid cooling economic indicators
  • Internal divisions emerge at the central bank as policymakers debate the pace and magnitude of easing
  • Markets anticipate at least one more cut in December, with the Fed Funds Rate potentially dropping to 3.50%-3.75%

Federal Reserve Governor Michael Miran has broken with more cautious colleagues to call for substantial interest rate reductions, signaling growing concern within the central bank about economic momentum. The unusually direct comments come as the Fed has already implemented two quarter-point cuts this year—in September and November—bringing the benchmark rate to a range of 3.75%-4.00%.

Miran's push for more aggressive action reflects what people familiar with the matter describe as "increasing unease" about the trajectory of both the labor market and inflation. While price pressures remain above the Fed's 2% target, recent data shows clear signs of moderation, particularly in wage growth and consumer spending.

"The economic landscape has shifted meaningfully," Miran said during a private briefing with financial institutions, according to two attendees who requested anonymity because the discussions were confidential. "We need to respond with appropriate force to avoid falling behind the curve."

The call for larger cuts exposes deepening divisions within the Fed's policymaking committee. Some officials prefer maintaining the current gradual approach, arguing that premature aggressive easing could reignite inflationary pressures that took nearly two years to contain.

Efforts to reach a consensus have hit a snag, according to people familiar with the internal discussions. The debate centers on whether the cooling job market—which has shown slowing growth and moderating wage gains—warrants more immediate, substantial intervention.

Treasury yields fell immediately following the news, with the two-year note dropping 8 basis points to 3.92% in afternoon trading. Equity markets rallied, particularly rate-sensitive sectors like housing and technology.

For borrowers, the prospect of larger cuts brings welcome relief. Mortgage rates have already begun trending lower, with the average 30-year fixed rate approaching three-year lows. This improvement in affordability could provide a much-needed boost to the housing market, which has struggled with low inventory and high prices throughout the tightening cycle.

A further cut is being considered for December, which would lower the Fed Funds Rate to 3.50%-3.75%. Fed Chair Jerome Powell has emphasized that further cuts are not guaranteed and will depend on economic data, but market participants are increasingly betting on continued easing.

"The debate is no longer about whether to cut, but how fast and how far," said one institutional investor who monitors Fed communications closely. "Miran's comments suggest the doves are gaining traction at a critical moment."

Fed representatives declined to comment on internal policy discussions when reached Thursday afternoon. Miran's office did not respond to multiple requests for clarification on his remarks.

Correction: An earlier version of this article misstated the current Fed Funds Rate range. It is 3.75%-4.00%, not 3.50%-3.75%. The potential December cut would bring it to 3.50%-3.75%.