Fed "dovish sentinel" Milan: Strong employment does not hinder rate cuts, "going deregulation" becomes a key driver.

Federal Reserve Governor Stephen Miran said that the unexpectedly strong January employment data does not mean that policymakers should postpone further rate cuts. Miran stated that supply-side reforms such as reducing business regulations, as well as expectations of a slowdown in housing inflation, will pave the way for policymakers to continue lowering the benchmark interest rate. "I would like to see a rate cut for various reasons. While today's employment data has made me optimistic about the economic situation, I believe that the fact is that expanding the supply side of the economy can still leave room for monetary policy," Miran said. Miran presented a unique policy logic linking monetary policy with government supply-side reforms. He believes that the deregulation policies promoted by the current Trump administration are increasing the potential growth rate of the U.S. economy and helping to reduce inflationary pressures. Miran pointed out that if the Federal Reserve does not lower the policy rate accordingly, it would actually create a tight financial environment, offsetting the economic benefits of deregulation. He emphasized that promoting the expansion of the supply side of the economy can allow monetary policy to take a more inclusive path of rate cuts. In terms of inflation, Miran appeared more optimistic than his colleagues. He estimated the current core inflation rate to be around 2.3%, already within the Federal Reserve's target range of 2%. He specifically mentioned that as housing inflation is expected to further slow down, the downward trend in inflation will become more stable. Additionally, he believes that the actual impact of tariffs on prices is "quite weak," and there are no signs of a significant inflation rebound, which clears the way for policymakers to further lower borrowing costs. Facing strong employment data, Miran did not interpret it as the economy overheating. Instead, he advocated for further lowering interest rates to further boost the labor market, believing that the U.S. still has the potential to absorb about one million new jobs without causing inflation. He sees such rate cuts as a "safety net" to prevent unexpected economic contraction due to policy lag effects. Miran's position contrasts sharply with the mainstream views of the Federal Reserve. In the January 2026 meeting, the Federal Reserve chose to keep rates unchanged, with Miran and Christopher Waller both casting dissenting votes in support of a further 25 basis point cut. Since joining the board in September 2025, Miran has consistently held a different view advocating for larger rate cuts at almost every meeting. Currently, Miran is in the final stages of his term. He filled the remaining term left by the previous governor and his term expires on January 31, 2026, but he can remain in office until his successor is confirmed. The market widely believes that with Trump nominating Kevin Warsh to succeed Miran and eventually become the Chairman of the Federal Reserve, Miran's series of radical statements are aimed at setting the tone for future easing policies before he leaves office. The latest data released on Wednesday showed that the seasonally adjusted non-farm employment in the U.S. rose by 130,000 in January, the largest increase since April 2025, with expectations of 70,000 and a revised previous value from 50,000 to 48,000. The unemployment rate in January in the U.S. was 4.3%, slightly lower than the market's expected 4.4%, hitting a new low since August 2025. Analysts say that these data have eased concerns about rising unemployment, which prompted the Federal Reserve to make three rate cuts at the end of 2025. Following the release of the January non-farm employment report, short-term interest rate futures in the U.S. fell. Currently, traders estimate a 20% probability of a rate cut by the Federal Reserve before April, significantly lower than the approximately 40% before the data was released. Although they still bet on the Federal Reserve making the next rate cut in June, they believe that the probability of staying put at that time has risen to nearly 40%, compared to about 25% before the employment report was released.