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August 8 2025 - 8:00pm
By nominating Stephen Miran to fill a temporary vacancy on the Federal Reserve’s Board of Governors, President Trump is stepping up his push for lower interest rates. A daunting monetary tightrope walk awaits, as the administration pivots to the next phase of its global rebalancing.
As current chair of the Council of Economic Advisers, Miran has been one of the leading theoreticians and surrogates for the administration’s trade reset. He has been a fixture on cable news and social media pushing back against criticisms of the President’s tariff agenda — especially allegations that it is inflationary. Along with others in the administration, Miran has also championed the argument that the new wave of tariffs provides a form of tax revenue that will cut into the federal deficit.
Managing interest rates is a key policy tool for negotiating the disruption that comes from reorienting the world’s trade order. In his 2024 examination of restructuring global trade, Miran emphasized the importance of making US foreign policy commitments sustainable, and his discussion was often as much about monetary policy as it was about trade agreements. Seen in that light, Miran’s transition to the Fed would put an ally of that global rebalancing at the heart of monetary policy.
Both sides of Miran’s argument — that tariffs are not inflationary and that they provide tax revenue — would be part of a case for a more dovish approach to interest rates. The Fed is increasingly divided on interest rates. Current chair Jerome Powell has consistently warned that Trump’s tariffs will be inflationary and has been resistant to cutting interest rates because of broader economic uncertainty.
But others disagree. When two members of the Fed board dissented from the decision to keep rates level at the Fed’s most recent meeting, it was the first double dissent in over 30 years. If Miran is confirmed by the Senate, that would bolster the ranks of the dovish objectors.
The White House likely sees other benefits to cutting rates. Post-Covid rate hikes have made housing even less affordable for young people, while higher borrowing costs have strained the federal budget. In 2024, interest on the national debt reached $880 billion. For doves, lower rates could ease pressure on both household finances and the government’s balance sheet.
If the Fed does go in a more dovish direction on interest rates, it has an intricate balancing act ahead. Federal deficits — and not just interest rates — are major drivers of the burden of federal borrowing. The last time there was a substantial drop in borrowing costs as a percentage of GDP was the Nineties, when deficit spending was curtailed. And dovishness pushed too far can be counterproductive. The Biden years demonstrated the way that inflation can ravage the finances of working families, so the Fed will need to be vigilant about any inflation surge. Moreover, it still needs to keep the confidence of investors; if it comes to be viewed as an unreliable political actor, its effectiveness in managing the nation’s monetary supply will be imperiled.
Lowered interest rates could be viewed as offering fiscal breathing room rather than as a panacea. Cutting the costs of borrowing in the short term could provide a window for longer-term fiscal and economic reforms — such as a rejuvenated manufacturing sector — to take effect. The dollar’s privileged status in the global financial system gives the United States considerable latitude in borrowing, but long-term fiscal stability will require cutting deficits — and not just interest rates.
